Correlation Between Growth Fund and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Pentair PLC 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 Growth Fund and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Pentair PLC, you can compare the effects of market volatilities on Growth Fund and Pentair PLC 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 Growth Fund with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Pentair PLC.
Diversification Opportunities for Growth Fund and Pentair PLC
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Pentair is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Growth Fund 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 Growth Fund Of are associated (or correlated) with Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Growth Fund i.e., Growth Fund and Pentair PLC go up and down completely randomly.
Pair Corralation between Growth Fund and Pentair PLC
Assuming the 90 days horizon Growth Fund is expected to generate 1.95 times less return on investment than Pentair PLC. But when comparing it to its historical volatility, Growth Fund Of is 1.68 times less risky than Pentair PLC. It trades about 0.1 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,716 in Pentair PLC on August 27, 2024 and sell it today you would earn a total of 2,977 from holding Pentair PLC or generate 38.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Pentair PLC
Performance |
| Timeline |
| Growth Fund |
| Pentair PLC |
Growth Fund and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Pentair PLC
The main advantage of trading using opposite Growth Fund and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Growth Fund vs. Income Fund Of | Growth Fund vs. New World Fund | Growth Fund vs. American Mutual Fund | Growth Fund vs. American Mutual Fund |
| Pentair PLC vs. Aquagold International | Pentair PLC vs. Morningstar Unconstrained Allocation | Pentair PLC vs. High Yield Municipal Fund | Pentair PLC vs. Thrivent High Yield |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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