Correlation Between Pentair Plc and American Express
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and American Express 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 American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and American Express, you can compare the effects of market volatilities on Pentair Plc and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and American Express.
Diversification Opportunities for Pentair Plc and American Express
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Pentair Plc i.e., Pentair Plc and American Express go up and down completely randomly.
Pair Corralation between Pentair Plc and American Express
Assuming the 90 days horizon Pentair Plc is expected to generate 1.08 times less return on investment than American Express. But when comparing it to its historical volatility, Pentair plc is 1.89 times less risky than American Express. It trades about 0.45 of its potential returns per unit of risk. American Express is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 24,980 in American Express on September 5, 2024 and sell it today you would earn a total of 3,900 from holding American Express or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. American Express
Performance |
| Timeline |
| Pentair plc |
| American Express |
Pentair Plc and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and American Express
The main advantage of trading using opposite Pentair Plc and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.| Pentair Plc vs. Schneider Electric SE | Pentair Plc vs. Emerson Electric Co | Pentair Plc vs. Parker Hannifin |
| American Express vs. FORWARD AIR P | American Express vs. Pentair plc | American Express vs. IMPERIAL TOBACCO | American Express vs. GUARDANT HEALTH CL |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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