Correlation Between Pentair Plc and Naturgy Energy
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Naturgy Energy 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 Naturgy Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Naturgy Energy Group, you can compare the effects of market volatilities on Pentair Plc and Naturgy Energy 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 Naturgy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Naturgy Energy.
Diversification Opportunities for Pentair Plc and Naturgy Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pentair and Naturgy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Naturgy Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy Energy Group 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 Naturgy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy Energy Group has no effect on the direction of Pentair Plc i.e., Pentair Plc and Naturgy Energy go up and down completely randomly.
Pair Corralation between Pentair Plc and Naturgy Energy
Assuming the 90 days horizon Pentair plc is expected to generate 1.15 times more return on investment than Naturgy Energy. However, Pentair Plc is 1.15 times more volatile than Naturgy Energy Group. It trades about 0.12 of its potential returns per unit of risk. Naturgy Energy Group is currently generating about 0.01 per unit of risk. If you would invest 4,049 in Pentair plc on September 16, 2024 and sell it today you would earn a total of 6,286 from holding Pentair plc or generate 155.25% 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. Naturgy Energy Group
Performance |
Timeline |
Pentair plc |
Naturgy Energy Group |
Pentair Plc and Naturgy Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pentair Plc and Naturgy Energy
The main advantage of trading using opposite Pentair Plc and Naturgy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Naturgy Energy 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 Naturgy Energy will offset losses from the drop in Naturgy Energy'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 |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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