Correlation Between Pentair Plc and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Safety Insurance 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 Safety Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Safety Insurance Group, you can compare the effects of market volatilities on Pentair Plc and Safety Insurance 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 Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Safety Insurance.
Diversification Opportunities for Pentair Plc and Safety Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pentair and Safety is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Pentair Plc i.e., Pentair Plc and Safety Insurance go up and down completely randomly.
Pair Corralation between Pentair Plc and Safety Insurance
Assuming the 90 days horizon Pentair plc is expected to generate 1.13 times more return on investment than Safety Insurance. However, Pentair Plc is 1.13 times more volatile than Safety Insurance Group. It trades about 0.12 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.05 per unit of risk. If you would invest 7,134 in Pentair plc on September 1, 2024 and sell it today you would earn a total of 3,181 from holding Pentair plc or generate 44.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Safety Insurance Group
Performance |
| Timeline |
| Pentair plc |
| Safety Insurance |
Pentair Plc and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Safety Insurance
The main advantage of trading using opposite Pentair Plc and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Pentair Plc vs. ECHO INVESTMENT ZY | Pentair Plc vs. MGIC INVESTMENT | Pentair Plc vs. New Residential Investment | Pentair Plc vs. Strategic Investments AS |
| Safety Insurance vs. The Progressive | Safety Insurance vs. Fairfax Financial Holdings | Safety Insurance vs. Insurance Australia Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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