Correlation Between IDEX and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Pentair PLC, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Pentair PLC.
Diversification Opportunities for IDEX and Pentair PLC
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IDEX and Pentair is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Pentair PLC go up and down completely randomly.
Pair Corralation between IDEX and Pentair PLC
Considering the 90-day investment horizon IDEX Corporation is expected to generate 2.03 times more return on investment than Pentair PLC. However, IDEX is 2.03 times more volatile than Pentair PLC. It trades about 0.23 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.34 per unit of risk. If you would invest 20,486 in IDEX Corporation on August 24, 2024 and sell it today you would earn a total of 2,259 from holding IDEX Corporation or generate 11.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Pentair PLC
Performance |
| Timeline |
| IDEX |
| Pentair PLC |
IDEX and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Pentair PLC
The main advantage of trading using opposite IDEX and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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.The idea behind IDEX Corporation and Pentair PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Pentair PLC vs. Small Cap Core | Pentair PLC vs. Freedom Holding Corp | Pentair PLC vs. Gfl Environmental Holdings | Pentair PLC vs. Growth Fund Of |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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