Correlation Between Ametek and Pentair PLC

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

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

Diversification Opportunities for Ametek and Pentair PLC

0.92

Correlation Coefficient

Ametek  Pentair PLC

Almost no diversification

The 3 months correlation between Ametek and Pentair is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Ametek 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 Ametek Inc 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 Ametek i.e., Ametek and Pentair PLC go up and down completely randomly.

Pair Corralation between Ametek and Pentair PLC

Considering the 90-day investment horizon Ametek Inc is expected to generate 1.43 times more return on investment than Pentair PLC. However, Ametek is 1.43 times more volatile than Pentair PLC. It trades about 0.08 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.07 per unit of risk. If you would invest  17,029  in Ametek Inc on September 24, 2024 and sell it today you would earn a total of  1,307  from holding Ametek Inc or generate 7.68% return on investment over 90 days.

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

Ametek Inc  vs.  Pentair PLC

Ametek Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pentair PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pentair PLC is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ametek and Pentair PLC

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

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.