Correlation Between Pentair Plc and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Dow Jones Industrial, you can compare the effects of market volatilities on Pentair Plc and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Dow Jones.
Diversification Opportunities for Pentair Plc and Dow Jones
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and Dow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Pentair Plc i.e., Pentair Plc and Dow Jones go up and down completely randomly.
Pair Corralation between Pentair Plc and Dow Jones
Assuming the 90 days horizon Pentair plc is expected to generate 2.38 times more return on investment than Dow Jones. However, Pentair Plc is 2.38 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 4,236 in Pentair plc on August 25, 2024 and sell it today you would earn a total of 5,794 from holding Pentair plc or generate 136.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.42% |
| Values | Daily Returns |
Pentair plc vs. Dow Jones Industrial
Performance |
| Timeline |
Pentair Plc and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pentair plc
Pair trading matchups for Pentair Plc
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Pentair Plc and Dow Jones
The main advantage of trading using opposite Pentair Plc and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Pentair Plc vs. Superior Plus Corp | Pentair Plc vs. NMI Holdings | Pentair Plc vs. Origin Agritech | Pentair Plc vs. SIVERS SEMICONDUCTORS AB |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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