Correlation Between Nexstar Broadcasting and Pentair PLC

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

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

Diversification Opportunities for Nexstar Broadcasting and Pentair PLC

0.42

Correlation Coefficient

Nexstar Broadcasting  Pentair PLC

Very weak diversification

The 3 months correlation between Nexstar and Pentair is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Nexstar Broadcasting i.e., Nexstar Broadcasting and Pentair PLC go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and Pentair PLC

Given the investment horizon of 90 days Nexstar Broadcasting is expected to generate 13.36 times less return on investment than Pentair PLC. In addition to that, Nexstar Broadcasting is 2.36 times more volatile than Pentair PLC. It trades about 0.01 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.3 per unit of volatility. If you would invest  9,128  in Pentair PLC on September 13, 2024 and sell it today you would earn a total of  1,701  from holding Pentair PLC or generate 18.63% return on investment over 90 days.

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

Nexstar Broadcasting Group  vs.  Pentair PLC

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexstar Broadcasting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pentair PLC

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexstar Broadcasting and Pentair PLC

The main advantage of trading using opposite Nexstar Broadcasting and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.