Correlation Between Pentair Plc and Prosus NV
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Prosus NV 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 Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Prosus NV, you can compare the effects of market volatilities on Pentair Plc and Prosus NV 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 Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Prosus NV.
Diversification Opportunities for Pentair Plc and Prosus NV
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pentair and Prosus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Pentair Plc i.e., Pentair Plc and Prosus NV go up and down completely randomly.
Pair Corralation between Pentair Plc and Prosus NV
Assuming the 90 days horizon Pentair plc is expected to generate 0.88 times more return on investment than Prosus NV. However, Pentair plc is 1.13 times less risky than Prosus NV. It trades about 0.34 of its potential returns per unit of risk. Prosus NV is currently generating about -0.03 per unit of risk. If you would invest 8,574 in Pentair plc on August 30, 2024 and sell it today you would earn a total of 1,681 from holding Pentair plc or generate 19.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Pentair plc vs. Prosus NV
Performance |
| Timeline |
| Pentair plc |
| Prosus NV |
Pentair Plc and Prosus NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Prosus NV
The main advantage of trading using opposite Pentair Plc and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV's long position.| Pentair Plc vs. ABB | Pentair Plc vs. Superior Plus Corp | Pentair Plc vs. NMI Holdings | Pentair Plc vs. SIVERS SEMICONDUCTORS AB |
| Prosus NV vs. Pentair plc | Prosus NV vs. Alaska Air Group | Prosus NV vs. Norwegian Air Shuttle | Prosus NV vs. Astral Foods Limited |
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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