Correlation Between STEEL DYNAMICS and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both STEEL DYNAMICS 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 STEEL DYNAMICS and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STEEL DYNAMICS and Pentair plc, you can compare the effects of market volatilities on STEEL DYNAMICS 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 STEEL DYNAMICS with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL DYNAMICS and Pentair Plc.
Diversification Opportunities for STEEL DYNAMICS and Pentair Plc
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between STEEL and Pentair is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and Pentair Plc go up and down completely randomly.
Pair Corralation between STEEL DYNAMICS and Pentair Plc
Assuming the 90 days trading horizon STEEL DYNAMICS is expected to generate 2.94 times less return on investment than Pentair Plc. In addition to that, STEEL DYNAMICS is 1.26 times more volatile than Pentair plc. It trades about 0.03 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.1 per unit of volatility. If you would invest 4,398 in Pentair plc on October 13, 2024 and sell it today you would earn a total of 5,220 from holding Pentair plc or generate 118.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STEEL DYNAMICS vs. Pentair plc
Performance |
| Timeline |
| STEEL DYNAMICS |
| Pentair plc |
STEEL DYNAMICS and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STEEL DYNAMICS and Pentair Plc
The main advantage of trading using opposite STEEL DYNAMICS and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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.| STEEL DYNAMICS vs. VULCAN MATERIALS | STEEL DYNAMICS vs. Goodyear Tire Rubber | STEEL DYNAMICS vs. Materialise NV | STEEL DYNAMICS vs. Vulcan Materials |
| Pentair Plc vs. Xiwang Special Steel | Pentair Plc vs. STEEL DYNAMICS | Pentair Plc vs. Lifeway Foods | Pentair Plc vs. Mount Gibson Iron |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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