Correlation Between Pentair Plc and BW OFFSHORE

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

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

Diversification Opportunities for Pentair Plc and BW OFFSHORE

-0.38

Correlation Coefficient

Pentair Plc  BW OFFSHORE

Very good diversification

The 3 months correlation between Pentair and XY81 is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of Pentair Plc i.e., Pentair Plc and BW OFFSHORE go up and down completely randomly.

Pair Corralation between Pentair Plc and BW OFFSHORE

Assuming the 90 days horizon Pentair plc is expected to generate 0.72 times more return on investment than BW OFFSHORE. However, Pentair plc is 1.38 times less risky than BW OFFSHORE. It trades about 0.11 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.03 per unit of risk. If you would invest  4,035  in Pentair plc on September 23, 2024 and sell it today you would earn a total of  5,659  from holding Pentair plc or generate 140.25% return on investment over 90 days.

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

Pentair plc  vs.  BW OFFSHORE LTD

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 uncertain basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

BW OFFSHORE LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pentair Plc and BW OFFSHORE

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

The idea behind Pentair plc and BW OFFSHORE LTD 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.