Correlation Between 404280DU0 and Pentair PLC

Can any of the company-specific risk be diversified away by investing in both 404280DU0 and Pentair PLC 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 404280DU0 and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HSBC 6161 09 MAR 29 and Pentair PLC, you can compare the effects of market volatilities on 404280DU0 and Pentair PLC 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 404280DU0 with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of 404280DU0 and Pentair PLC.

Diversification Opportunities for 404280DU0 and Pentair PLC

-0.73

Correlation Coefficient

404280DU0  Pentair PLC

Pay attention - limited upside

The 3 months correlation between 404280DU0 and Pentair is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HSBC 6161 09 MAR 29 and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and 404280DU0 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 HSBC 6161 09 MAR 29 are associated (or correlated) with Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of 404280DU0 i.e., 404280DU0 and Pentair PLC go up and down completely randomly.

Pair Corralation between 404280DU0 and Pentair PLC

Assuming the 90 days trading horizon HSBC 6161 09 MAR 29 is expected to under-perform the Pentair PLC. But the bond apears to be less risky and, when comparing its historical volatility, HSBC 6161 09 MAR 29 is 4.13 times less risky than Pentair PLC. The bond trades about -0.18 of its potential returns per unit of risk. The Pentair PLC is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  8,496  in Pentair PLC on September 5, 2024 and sell it today you would earn a total of  2,387  from holding Pentair PLC or generate 28.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

HSBC 6161 09 MAR 29  vs.  Pentair PLC

HSBC 6161 09

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC 6161 09 MAR 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 404280DU0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pentair PLC

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 404280DU0 and Pentair PLC

The main advantage of trading using opposite 404280DU0 and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 404280DU0 position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.

The idea behind HSBC 6161 09 MAR 29 and Pentair PLC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .