Correlation Between Graham and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Graham 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 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 and Pentair PLC, you can compare the effects of market volatilities on Graham 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 with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Pentair PLC.
Diversification Opportunities for Graham and Pentair PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Graham and Pentair is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Graham 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 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 i.e., Graham and Pentair PLC go up and down completely randomly.
Pair Corralation between Graham and Pentair PLC
Considering the 90-day investment horizon Graham is expected to generate 1.65 times more return on investment than Pentair PLC. However, Graham is 1.65 times more volatile than Pentair PLC. It trades about 0.12 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.12 per unit of risk. If you would invest 961.00 in Graham on August 30, 2024 and sell it today you would earn a total of 3,440 from holding Graham or generate 357.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Graham vs. Pentair PLC
Performance |
| Timeline |
| Graham |
| Pentair PLC |
Graham and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Pentair PLC
The main advantage of trading using opposite Graham and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham 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 vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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