Correlation Between Pentair Plc and Fidelity National

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

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

Diversification Opportunities for Pentair Plc and Fidelity National

0.58

Correlation Coefficient

Pentair Plc  Fidelity National

Very weak diversification

The 3 months correlation between Pentair and Fidelity is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Fidelity National Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Pentair Plc i.e., Pentair Plc and Fidelity National go up and down completely randomly.

Pair Corralation between Pentair Plc and Fidelity National

Assuming the 90 days horizon Pentair plc is expected to generate 0.96 times more return on investment than Fidelity National. However, Pentair plc is 1.05 times less risky than Fidelity National. It trades about 0.07 of its potential returns per unit of risk. Fidelity National Information is currently generating about -0.2 per unit of risk. If you would invest  10,040  in Pentair plc on September 19, 2024 and sell it today you would earn a total of  130.00  from holding Pentair plc or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Pentair plc  vs.  Fidelity National Information

Pentair plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 19 (%) 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.

Fidelity National

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity National 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 Fidelity National

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

The idea behind Pentair plc and Fidelity National Information 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.