Correlation Between Pentair Plc and New Residential
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and New Residential 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 New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and New Residential Investment, you can compare the effects of market volatilities on Pentair Plc and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and New Residential.
Diversification Opportunities for Pentair Plc and New Residential
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pentair and New is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Pentair Plc i.e., Pentair Plc and New Residential go up and down completely randomly.
Pair Corralation between Pentair Plc and New Residential
Assuming the 90 days horizon Pentair Plc is expected to generate 3.63 times less return on investment than New Residential. But when comparing it to its historical volatility, Pentair plc is 1.36 times less risky than New Residential. It trades about 0.14 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,020 in New Residential Investment on October 23, 2024 and sell it today you would earn a total of 80.00 from holding New Residential Investment or generate 7.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. New Residential Investment
Performance |
| Timeline |
| Pentair plc |
| New Residential Inve |
Pentair Plc and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and New Residential
The main advantage of trading using opposite Pentair Plc and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Pentair Plc vs. Fevertree Drinks PLC | Pentair Plc vs. ONWARD MEDICAL BV | Pentair Plc vs. Genertec Universal Medical | Pentair Plc vs. CompuGroup Medical SE |
| New Residential vs. Verizon Communications | New Residential vs. MICRONIC MYDATA | New Residential vs. Cass Information Systems | New Residential vs. DATATEC LTD 2 |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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