Correlation Between Pentair PLC and Cummins
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Cummins 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 Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Cummins, you can compare the effects of market volatilities on Pentair PLC and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Cummins.
Diversification Opportunities for Pentair PLC and Cummins
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and Cummins is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Pentair PLC i.e., Pentair PLC and Cummins go up and down completely randomly.
Pair Corralation between Pentair PLC and Cummins
Considering the 90-day investment horizon Pentair PLC is expected to generate 1.5 times less return on investment than Cummins. But when comparing it to its historical volatility, Pentair PLC is 2.07 times less risky than Cummins. It trades about 0.35 of its potential returns per unit of risk. Cummins is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 33,301 in Cummins on August 27, 2024 and sell it today you would earn a total of 3,961 from holding Cummins or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair PLC vs. Cummins
Performance |
| Timeline |
| Pentair PLC |
| Cummins |
Pentair PLC and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and Cummins
The main advantage of trading using opposite Pentair PLC and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |