Correlation Between Air New and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both Air New 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 Air New and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Pentair plc, you can compare the effects of market volatilities on Air New 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 Air New with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Pentair Plc.
Diversification Opportunities for Air New and Pentair Plc
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Air and Pentair is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Air New 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 Air New Zealand 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 Air New i.e., Air New and Pentair Plc go up and down completely randomly.
Pair Corralation between Air New and Pentair Plc
Assuming the 90 days trading horizon Air New Zealand is expected to generate 2.3 times more return on investment than Pentair Plc. However, Air New is 2.3 times more volatile than Pentair plc. It trades about 0.1 of its potential returns per unit of risk. Pentair plc is currently generating about -0.02 per unit of risk. If you would invest 30.00 in Air New Zealand on October 23, 2024 and sell it today you would earn a total of 3.00 from holding Air New Zealand or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air New Zealand vs. Pentair plc
Performance |
| Timeline |
| Air New Zealand |
| Pentair plc |
Air New and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Pentair Plc
The main advantage of trading using opposite Air New and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New 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.| Air New vs. The Trade Desk | Air New vs. Perseus Mining Limited | Air New vs. MCEWEN MINING INC | Air New vs. ARDAGH METAL PACDL 0001 |
| Pentair Plc vs. Fevertree Drinks PLC | Pentair Plc vs. ONWARD MEDICAL BV | Pentair Plc vs. Genertec Universal Medical | Pentair Plc vs. CompuGroup Medical SE |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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