Correlation Between Pentair Plc and Hemisphere Energy

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

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

Diversification Opportunities for Pentair Plc and Hemisphere Energy

0.64

Correlation Coefficient

Pentair Plc  Hemisphere Energy

Poor diversification

The 3 months correlation between Pentair and Hemisphere is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Hemisphere Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy Corp 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy Corp has no effect on the direction of Pentair Plc i.e., Pentair Plc and Hemisphere Energy go up and down completely randomly.

Pair Corralation between Pentair Plc and Hemisphere Energy

Assuming the 90 days horizon Pentair plc is expected to generate 0.69 times more return on investment than Hemisphere Energy. However, Pentair plc is 1.44 times less risky than Hemisphere Energy. It trades about 0.32 of its potential returns per unit of risk. Hemisphere Energy Corp is currently generating about 0.11 per unit of risk. If you would invest  7,980  in Pentair plc on September 3, 2024 and sell it today you would earn a total of  2,335  from holding Pentair plc or generate 29.26% return on investment over 90 days.

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

Pentair plc  vs.  Hemisphere Energy Corp

Pentair plc

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 25 (%) 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.

Hemisphere Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hemisphere Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and Hemisphere Energy

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

The idea behind Pentair plc and Hemisphere Energy Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.