Correlation Between SOGECLAIR and Pentair Plc

Can any of the company-specific risk be diversified away by investing in both SOGECLAIR 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 SOGECLAIR and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOGECLAIR SA INH and Pentair plc, you can compare the effects of market volatilities on SOGECLAIR 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 SOGECLAIR with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOGECLAIR and Pentair Plc.

Diversification Opportunities for SOGECLAIR and Pentair Plc

0.01

Correlation Coefficient

SOGECLAIR  Pentair Plc

Significant diversification

The 3 months correlation between SOGECLAIR and Pentair is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SOGECLAIR SA INH and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and SOGECLAIR 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 SOGECLAIR SA INH 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 SOGECLAIR i.e., SOGECLAIR and Pentair Plc go up and down completely randomly.

Pair Corralation between SOGECLAIR and Pentair Plc

Assuming the 90 days horizon SOGECLAIR SA INH is expected to generate 1.35 times more return on investment than Pentair Plc. However, SOGECLAIR is 1.35 times more volatile than Pentair plc. It trades about -0.02 of its potential returns per unit of risk. Pentair plc is currently generating about -0.17 per unit of risk. If you would invest  1,775  in SOGECLAIR SA INH on September 24, 2024 and sell it today you would lose (20.00) from holding SOGECLAIR SA INH or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SOGECLAIR SA INH  vs.  Pentair plc

SOGECLAIR SA INH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOGECLAIR SA INH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOGECLAIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pentair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SOGECLAIR and Pentair Plc

The main advantage of trading using opposite SOGECLAIR and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOGECLAIR 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.

The idea behind SOGECLAIR SA INH and Pentair plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Transaction History module to view history of all your transactions and understand their impact on performance.