Correlation Between Graham Holdings and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Graham Holdings 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 Graham Holdings and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham Holdings Co and Pentair PLC, you can compare the effects of market volatilities on Graham Holdings 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 Graham Holdings with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham Holdings and Pentair PLC.
Diversification Opportunities for Graham Holdings and Pentair PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Graham and Pentair is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Graham Holdings 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 Graham Holdings Co 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 Graham Holdings i.e., Graham Holdings and Pentair PLC go up and down completely randomly.
Pair Corralation between Graham Holdings and Pentair PLC
Considering the 90-day investment horizon Graham Holdings Co is expected to generate 1.14 times more return on investment than Pentair PLC. However, Graham Holdings is 1.14 times more volatile than Pentair PLC. It trades about 0.28 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.17 per unit of risk. If you would invest 86,550 in Graham Holdings Co on November 2, 2024 and sell it today you would earn a total of 6,661 from holding Graham Holdings Co or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Graham Holdings Co vs. Pentair PLC
Performance |
| Timeline |
| Graham Holdings |
| Pentair PLC |
Graham Holdings and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham Holdings and Pentair PLC
The main advantage of trading using opposite Graham Holdings and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings 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.| Graham Holdings vs. Cable One | Graham Holdings vs. Adtalem Global Education | Graham Holdings vs. Axalta Coating Systems | Graham Holdings vs. Madison Square Garden |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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