Correlation Between BRIT AMER and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both BRIT AMER 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 BRIT AMER and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and Pentair plc, you can compare the effects of market volatilities on BRIT AMER 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 BRIT AMER with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Pentair Plc.
Diversification Opportunities for BRIT AMER and Pentair Plc
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BRIT and Pentair is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and BRIT AMER 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 BRIT AMER TOBACCO 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 BRIT AMER i.e., BRIT AMER and Pentair Plc go up and down completely randomly.
Pair Corralation between BRIT AMER and Pentair Plc
Assuming the 90 days trading horizon BRIT AMER is expected to generate 1.16 times less return on investment than Pentair Plc. But when comparing it to its historical volatility, BRIT AMER TOBACCO is 1.05 times less risky than Pentair Plc. It trades about 0.35 of its potential returns per unit of risk. Pentair plc is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 9,122 in Pentair plc on September 2, 2024 and sell it today you would earn a total of 1,193 from holding Pentair plc or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. Pentair plc
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| Pentair plc |
BRIT AMER and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and Pentair Plc
The main advantage of trading using opposite BRIT AMER and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER 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.| BRIT AMER vs. Gaztransport Technigaz SA | BRIT AMER vs. AUST AGRICULTURAL | BRIT AMER vs. ANTA SPORTS PRODUCT | BRIT AMER vs. PARKEN Sport Entertainment |
| Pentair Plc vs. COVIVIO HOTELS INH | Pentair Plc vs. Park Hotels Resorts | Pentair Plc vs. Host Hotels Resorts | Pentair Plc vs. QUEEN S ROAD |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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