Correlation Between Pentair Plc and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Discover Financial 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 Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Discover Financial Services, you can compare the effects of market volatilities on Pentair Plc and Discover Financial 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 Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Discover Financial.
Diversification Opportunities for Pentair Plc and Discover Financial
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and Discover is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Pentair Plc i.e., Pentair Plc and Discover Financial go up and down completely randomly.
Pair Corralation between Pentair Plc and Discover Financial
Assuming the 90 days horizon Pentair plc is expected to generate 0.71 times more return on investment than Discover Financial. However, Pentair plc is 1.41 times less risky than Discover Financial. It trades about 0.12 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.07 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 Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Discover Financial Services
Performance |
| Timeline |
| Pentair plc |
| Discover Financial |
Pentair Plc and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Discover Financial
The main advantage of trading using opposite Pentair Plc and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial'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 |
| Discover Financial vs. Pentair plc | Discover Financial vs. HF SINCLAIR P | Discover Financial vs. Air New Zealand | Discover Financial vs. WIZZ AIR HLDGUNSPADR4 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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