Correlation Between Pentair PLC and Atlas Copco

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

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

Diversification Opportunities for Pentair PLC and Atlas Copco

-0.79

Correlation Coefficient

Pentair PLC  Atlas Copco

Pay attention - limited upside

The 3 months correlation between Pentair and Atlas is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Atlas Copco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco AB and Pentair PLC 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 Pentair PLC are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco AB has no effect on the direction of Pentair PLC i.e., Pentair PLC and Atlas Copco go up and down completely randomly.

Pair Corralation between Pentair PLC and Atlas Copco

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.93 times more return on investment than Atlas Copco. However, Pentair PLC is 1.08 times less risky than Atlas Copco. It trades about 0.11 of its potential returns per unit of risk. Atlas Copco AB is currently generating about 0.04 per unit of risk. If you would invest  4,400  in Pentair PLC on September 24, 2024 and sell it today you would earn a total of  5,683  from holding Pentair PLC or generate 129.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Pentair PLC  vs.  Atlas Copco AB

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.

Atlas Copco AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Copco AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pentair PLC and Atlas Copco

The main advantage of trading using opposite Pentair PLC and Atlas Copco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Atlas Copco 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 Atlas Copco will offset losses from the drop in Atlas Copco's long position.

The idea behind Pentair PLC and Atlas Copco AB 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.