Correlation Between New Residential and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both New Residential and Pentair Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining New Residential and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Pentair plc, you can compare the effects of market volatilities on New Residential and Pentair Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in New Residential with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Pentair Plc.
Diversification Opportunities for New Residential and Pentair Plc
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and Pentair is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and New Residential is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on New Residential Investment are associated (or correlated) with Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of New Residential i.e., New Residential and Pentair Plc go up and down completely randomly.
Pair Corralation between New Residential and Pentair Plc
Assuming the 90 days trading horizon New Residential is expected to generate 1.35 times less return on investment than Pentair Plc. But when comparing it to its historical volatility, New Residential Investment is 1.4 times less risky than Pentair Plc. It trades about 0.48 of its potential returns per unit of risk. Pentair plc is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 9,004 in Pentair plc on September 3, 2024 and sell it today you would earn a total of 1,311 from holding Pentair plc or generate 14.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. Pentair plc
Performance |
| Timeline |
| New Residential Inve |
| Pentair plc |
New Residential and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Pentair Plc
The main advantage of trading using opposite New Residential and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Pentair Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pentair Plc will offset losses from the drop in Pentair Plc's long position.| New Residential vs. Richardson Electronics | New Residential vs. Clean Energy Fuels | New Residential vs. Renesas Electronics | New Residential vs. METHODE ELECTRONICS |
| Pentair Plc vs. Bumrungrad Hospital Public | Pentair Plc vs. METHODE ELECTRONICS | Pentair Plc vs. AOI Electronics Co | Pentair Plc vs. Brockhaus Capital Management |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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