Correlation Between Pentair Plc and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Aristocrat Leisure 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 Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Aristocrat Leisure Limited, you can compare the effects of market volatilities on Pentair Plc and Aristocrat Leisure 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 Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Aristocrat Leisure.
Diversification Opportunities for Pentair Plc and Aristocrat Leisure
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pentair and Aristocrat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Pentair Plc i.e., Pentair Plc and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Pentair Plc and Aristocrat Leisure
Assuming the 90 days horizon Pentair plc is expected to under-perform the Aristocrat Leisure. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.07 times less risky than Aristocrat Leisure. The stock trades about -0.11 of its potential returns per unit of risk. The Aristocrat Leisure Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,160 in Aristocrat Leisure Limited on October 30, 2024 and sell it today you would lose (80.00) from holding Aristocrat Leisure Limited or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Aristocrat Leisure Limited
Performance |
| Timeline |
| Pentair plc |
| Aristocrat Leisure |
Pentair Plc and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Aristocrat Leisure
The main advantage of trading using opposite Pentair Plc and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.| Pentair Plc vs. Gladstone Investment | Pentair Plc vs. THRACE PLASTICS | Pentair Plc vs. REINET INVESTMENTS SCA | Pentair Plc vs. AGNC INVESTMENT |
| Aristocrat Leisure vs. Q2M Managementberatung AG | Aristocrat Leisure vs. PKSHA TECHNOLOGY INC | Aristocrat Leisure vs. Sims Metal Management | Aristocrat Leisure vs. Check Point Software |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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