Correlation Between Pentair PLC and Fanhua
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Fanhua 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 Pentair PLC and Fanhua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Fanhua Inc, you can compare the effects of market volatilities on Pentair PLC and Fanhua 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 Pentair PLC with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Fanhua.
Diversification Opportunities for Pentair PLC and Fanhua
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pentair and Fanhua is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Pentair PLC 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 Pentair PLC are associated (or correlated) with Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Pentair PLC i.e., Pentair PLC and Fanhua go up and down completely randomly.
Pair Corralation between Pentair PLC and Fanhua
Considering the 90-day investment horizon Pentair PLC is expected to generate 0.13 times more return on investment than Fanhua. However, Pentair PLC is 7.69 times less risky than Fanhua. It trades about -0.03 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.31 per unit of risk. If you would invest 9,928 in Pentair PLC on November 7, 2024 and sell it today you would lose (102.00) from holding Pentair PLC or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Pentair PLC vs. Fanhua Inc
Performance |
| Timeline |
| Pentair PLC |
| Fanhua Inc |
Pentair PLC and Fanhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and Fanhua
The main advantage of trading using opposite Pentair PLC and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Fanhua 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 Fanhua will offset losses from the drop in Fanhua's long position.| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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