Correlation Between Pentair PLC and IDEX
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and IDEX 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 IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and IDEX Corporation, you can compare the effects of market volatilities on Pentair PLC and IDEX 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 IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and IDEX.
Diversification Opportunities for Pentair PLC and IDEX
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pentair and IDEX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Pentair PLC i.e., Pentair PLC and IDEX go up and down completely randomly.
Pair Corralation between Pentair PLC and IDEX
Considering the 90-day investment horizon Pentair PLC is expected to generate 1.68 times less return on investment than IDEX. But when comparing it to its historical volatility, Pentair PLC is 2.1 times less risky than IDEX. It trades about 0.35 of its potential returns per unit of risk. IDEX Corporation is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 20,484 in IDEX Corporation on August 27, 2024 and sell it today you would earn a total of 2,766 from holding IDEX Corporation or generate 13.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair PLC vs. IDEX Corp.
Performance |
| Timeline |
| Pentair PLC |
| IDEX |
Pentair PLC and IDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and IDEX
The main advantage of trading using opposite Pentair PLC and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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