Correlation Between Pentair PLC and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Eaton 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 Pentair PLC and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Eaton PLC, you can compare the effects of market volatilities on Pentair PLC and Eaton 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 Pentair PLC with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Eaton PLC.
Diversification Opportunities for Pentair PLC and Eaton PLC
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and Eaton is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC 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 Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of Pentair PLC i.e., Pentair PLC and Eaton PLC go up and down completely randomly.
Pair Corralation between Pentair PLC and Eaton PLC
Considering the 90-day investment horizon Pentair PLC is expected to generate 0.87 times more return on investment than Eaton PLC. However, Pentair PLC is 1.14 times less risky than Eaton PLC. It trades about 0.14 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.05 per unit of risk. If you would invest 7,854 in Pentair PLC on August 24, 2024 and sell it today you would earn a total of 2,751 from holding Pentair PLC or generate 35.03% 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. Eaton PLC
Performance |
| Timeline |
| Pentair PLC |
| Eaton PLC |
Pentair PLC and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and Eaton PLC
The main advantage of trading using opposite Pentair PLC and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Eaton 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.| Pentair PLC vs. Small Cap Core | Pentair PLC vs. Freedom Holding Corp | Pentair PLC vs. Gfl Environmental Holdings | Pentair PLC vs. Growth Fund Of |
| Eaton PLC vs. Small Cap Core | Eaton PLC vs. Freedom Holding Corp | Eaton PLC vs. Gfl Environmental Holdings | Eaton 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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