Correlation Between National Retail and Pentair Plc

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

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

Diversification Opportunities for National Retail and Pentair Plc

-0.56

Correlation Coefficient

National Retail  Pentair Plc

Excellent diversification

The 3 months correlation between National and Pentair is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Pentair Plc go up and down completely randomly.

Pair Corralation between National Retail and Pentair Plc

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Pentair Plc. In addition to that, National Retail is 1.14 times more volatile than Pentair plc. It trades about -0.08 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.14 per unit of volatility. If you would invest  8,694  in Pentair plc on September 27, 2024 and sell it today you would earn a total of  1,068  from holding Pentair plc or generate 12.28% return on investment over 90 days.

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

National Retail Properties  vs.  Pentair plc

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 unsteady basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Retail and Pentair Plc

The main advantage of trading using opposite National Retail and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.