Correlation Between Pentair Plc and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both Pentair Plc and Westinghouse Air 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 Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair plc and Westinghouse Air Brake, you can compare the effects of market volatilities on Pentair Plc and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Westinghouse Air.
Diversification Opportunities for Pentair Plc and Westinghouse Air
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pentair and Westinghouse is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of Pentair Plc i.e., Pentair Plc and Westinghouse Air go up and down completely randomly.
Pair Corralation between Pentair Plc and Westinghouse Air
Assuming the 90 days horizon Pentair plc is expected to generate 1.07 times more return on investment than Westinghouse Air. However, Pentair Plc is 1.07 times more volatile than Westinghouse Air Brake. It trades about 0.12 of its potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.13 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pentair plc vs. Westinghouse Air Brake
Performance |
| Timeline |
| Pentair plc |
| Westinghouse Air Brake |
Pentair Plc and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair Plc and Westinghouse Air
The main advantage of trading using opposite Pentair Plc and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air'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 |
| Westinghouse Air vs. Union Pacific | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. NMI Holdings | Westinghouse Air vs. Origin Agritech |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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