Correlation Between Pentair Plc and Amazon
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Amazon Inc, you can compare the effects of market volatilities on Pentair Plc and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Amazon.
Diversification Opportunities for Pentair Plc and Amazon
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pentair and Amazon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Pentair Plc i.e., Pentair Plc and Amazon go up and down completely randomly.
Pair Corralation between Pentair Plc and Amazon
Assuming the 90 days horizon Pentair Plc is expected to generate 8.18 times less return on investment than Amazon. But when comparing it to its historical volatility, Pentair plc is 1.42 times less risky than Amazon. It trades about 0.03 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 21,950 in Amazon Inc on November 7, 2024 and sell it today you would earn a total of 1,065 from holding Amazon Inc or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Pentair plc vs. Amazon Inc
Performance |
| Timeline |
| Pentair plc |
| Amazon Inc |
Pentair Plc and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Amazon
The main advantage of trading using opposite Pentair Plc and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Pentair Plc vs. REVO INSURANCE SPA | Pentair Plc vs. Yanzhou Coal Mining | Pentair Plc vs. CHIBA BANK | Pentair Plc vs. UNIQA INSURANCE GR |
| Amazon vs. Heidelberg Materials AG | Amazon vs. Tower One Wireless | Amazon vs. BRIT AMER TOBACCO | Amazon vs. 24SEVENOFFICE GROUP AB |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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