Correlation Between Pentair Plc and Air New
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Air New 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 Air New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Air New Zealand, you can compare the effects of market volatilities on Pentair Plc and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Air New.
Diversification Opportunities for Pentair Plc and Air New
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pentair and Air is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Pentair Plc i.e., Pentair Plc and Air New go up and down completely randomly.
Pair Corralation between Pentair Plc and Air New
Assuming the 90 days horizon Pentair plc is expected to under-perform the Air New. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 2.3 times less risky than Air New. The stock trades about -0.02 of its potential returns per unit of risk. The Air New Zealand is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Air New Zealand on October 23, 2024 and sell it today you would earn a total of 3.00 from holding Air New Zealand or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Air New Zealand
Performance |
| Timeline |
| Pentair plc |
| Air New Zealand |
Pentair Plc and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Air New
The main advantage of trading using opposite Pentair Plc and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New'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 |
| Air New vs. The Trade Desk | Air New vs. Perseus Mining Limited | Air New vs. MCEWEN MINING INC | Air New vs. ARDAGH METAL PACDL 0001 |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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