Correlation Between East Africa and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both East Africa 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 East Africa and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and Pentair PLC, you can compare the effects of market volatilities on East Africa 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 East Africa with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Pentair PLC.
Diversification Opportunities for East Africa and Pentair PLC
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between East and Pentair is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Pentair PLC go up and down completely randomly.
Pair Corralation between East Africa and Pentair PLC
Assuming the 90 days horizon East Africa Metals is expected to generate 10.45 times more return on investment than Pentair PLC. However, East Africa is 10.45 times more volatile than Pentair PLC. It trades about 0.07 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.15 per unit of risk. If you would invest 6.26 in East Africa Metals on September 1, 2024 and sell it today you would earn a total of 4.74 from holding East Africa Metals or generate 75.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
East Africa Metals vs. Pentair PLC
Performance |
| Timeline |
| East Africa Metals |
| Pentair PLC |
East Africa and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Africa and Pentair PLC
The main advantage of trading using opposite East Africa and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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.| East Africa vs. Pasinex Resources Limited | East Africa vs. Commander Resources | East Africa vs. Forsys Metals Corp | East Africa vs. American CuMo Mining |
| Pentair PLC vs. Illinois Tool Works | Pentair PLC vs. Parker Hannifin | Pentair PLC vs. Emerson Electric | Pentair PLC vs. Smith AO |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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