Correlation Between Pentair Plc and Compagnie Plastic

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

By analyzing existing cross correlation between Pentair plc and Compagnie Plastic Omnium, you can compare the effects of market volatilities on Pentair Plc and Compagnie Plastic 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 Compagnie Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and Compagnie Plastic.

Diversification Opportunities for Pentair Plc and Compagnie Plastic

0.24

Correlation Coefficient

Pentair Plc  Compagnie Plastic

Modest diversification

The 3 months correlation between Pentair and Compagnie is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Pentair Plc i.e., Pentair Plc and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Pentair Plc and Compagnie Plastic

Assuming the 90 days horizon Pentair plc is expected to generate 0.54 times more return on investment than Compagnie Plastic. However, Pentair plc is 1.86 times less risky than Compagnie Plastic. It trades about 0.16 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about 0.04 per unit of risk. If you would invest  8,574  in Pentair plc on September 29, 2024 and sell it today you would earn a total of  1,188  from holding Pentair plc or generate 13.86% return on investment over 90 days.

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

Pentair plc  vs.  Compagnie Plastic Omnium

Pentair plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Plastic Omnium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pentair Plc and Compagnie Plastic

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

The idea behind Pentair plc and Compagnie Plastic Omnium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.