Correlation Between Pentair Plc and Vale SA
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Vale SA 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 Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Vale SA, you can compare the effects of market volatilities on Pentair Plc and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Vale SA.
Diversification Opportunities for Pentair Plc and Vale SA
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pentair and Vale is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Pentair Plc i.e., Pentair Plc and Vale SA go up and down completely randomly.
Pair Corralation between Pentair Plc and Vale SA
Assuming the 90 days horizon Pentair plc is expected to generate 0.73 times more return on investment than Vale SA. However, Pentair plc is 1.37 times less risky than Vale SA. It trades about 0.12 of its potential returns per unit of risk. Vale SA is currently generating about 0.04 per unit of risk. If you would invest 4,011 in Pentair plc on September 13, 2024 and sell it today you would earn a total of 6,209 from holding Pentair plc or generate 154.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Vale SA
Performance |
| Timeline |
| Pentair plc |
| Vale SA |
Pentair Plc and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Vale SA
The main advantage of trading using opposite Pentair Plc and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| Pentair Plc vs. Schneider Electric SE | Pentair Plc vs. Superior Plus Corp | Pentair Plc vs. SIVERS SEMICONDUCTORS AB | Pentair Plc vs. Norsk Hydro ASA |
| Vale SA vs. Sportsmans Warehouse Holdings | Vale SA vs. Big 5 Sporting | Vale SA vs. JD SPORTS FASH | Vale SA vs. Gaztransport Technigaz SA |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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