Correlation Between Mueller Water and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Mueller Water 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 Mueller Water and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mueller Water Products and Pentair PLC, you can compare the effects of market volatilities on Mueller Water 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 Mueller Water with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Water and Pentair PLC.
Diversification Opportunities for Mueller Water and Pentair PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mueller and Pentair is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Water Products and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Mueller Water 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 Mueller Water Products 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 Mueller Water i.e., Mueller Water and Pentair PLC go up and down completely randomly.
Pair Corralation between Mueller Water and Pentair PLC
Considering the 90-day investment horizon Mueller Water is expected to generate 1.06 times less return on investment than Pentair PLC. In addition to that, Mueller Water is 1.1 times more volatile than Pentair PLC. It trades about 0.1 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.12 per unit of volatility. If you would invest 4,354 in Pentair PLC on August 27, 2024 and sell it today you would earn a total of 6,339 from holding Pentair PLC or generate 145.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mueller Water Products vs. Pentair PLC
Performance |
| Timeline |
| Mueller Water Products |
| Pentair PLC |
Mueller Water and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mueller Water and Pentair PLC
The main advantage of trading using opposite Mueller Water and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Water 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.| Mueller Water vs. Enerpac Tool Group | Mueller Water vs. Luxfer Holdings PLC | Mueller Water vs. John Bean Technologies | Mueller Water vs. CSW Industrials |
| Pentair PLC vs. Aquagold International | Pentair PLC vs. Morningstar Unconstrained Allocation | Pentair PLC vs. High Yield Municipal Fund | Pentair PLC vs. Thrivent High Yield |
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.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |