Correlation Between Gorman Rupp and Pentair PLC

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

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

Diversification Opportunities for Gorman Rupp and Pentair PLC

0.8

Correlation Coefficient

Gorman Rupp  Pentair PLC

Very poor diversification

The 3 months correlation between Gorman and Pentair is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Gorman Rupp 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 Gorman Rupp 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 Gorman Rupp i.e., Gorman Rupp and Pentair PLC go up and down completely randomly.

Pair Corralation between Gorman Rupp and Pentair PLC

Considering the 90-day investment horizon Gorman Rupp is expected to generate 2.41 times more return on investment than Pentair PLC. However, Gorman Rupp is 2.41 times more volatile than Pentair PLC. It trades about 0.17 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.4 per unit of risk. If you would invest  3,866  in Gorman Rupp on August 31, 2024 and sell it today you would earn a total of  363.00  from holding Gorman Rupp or generate 9.39% return on investment over 90 days.

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

Gorman Rupp  vs.  Pentair PLC

Gorman Rupp

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gorman Rupp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Gorman Rupp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pentair PLC

Risk-Adjusted Performance

29 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gorman Rupp and Pentair PLC

The main advantage of trading using opposite Gorman Rupp and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gorman Rupp 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 Gorman Rupp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.