Correlation Between Pentair Plc and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and PennantPark Investment 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 PennantPark Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and PennantPark Investment, you can compare the effects of market volatilities on Pentair Plc and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and PennantPark Investment.
Diversification Opportunities for Pentair Plc and PennantPark Investment
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Pentair and PennantPark is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Pentair Plc i.e., Pentair Plc and PennantPark Investment go up and down completely randomly.
Pair Corralation between Pentair Plc and PennantPark Investment
Assuming the 90 days horizon Pentair Plc is expected to generate 1.36 times less return on investment than PennantPark Investment. But when comparing it to its historical volatility, Pentair plc is 2.17 times less risky than PennantPark Investment. It trades about 0.08 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 663.00 in PennantPark Investment on November 1, 2024 and sell it today you would earn a total of 12.00 from holding PennantPark Investment or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. PennantPark Investment
Performance |
| Timeline |
| Pentair plc |
| PennantPark Investment |
Pentair Plc and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and PennantPark Investment
The main advantage of trading using opposite Pentair Plc and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.| Pentair Plc vs. PennantPark Investment | Pentair Plc vs. Tsingtao Brewery | Pentair Plc vs. Apollo Investment Corp | Pentair Plc vs. DIVERSIFIED ROYALTY |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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