Correlation Between Pentair PLC and CATLIN GROUP

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

By analyzing existing cross correlation between Pentair PLC and CATLIN GROUP , you can compare the effects of market volatilities on Pentair PLC and CATLIN GROUP 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 CATLIN GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and CATLIN GROUP.

Diversification Opportunities for Pentair PLC and CATLIN GROUP

-0.46

Correlation Coefficient

Pentair PLC  CATLIN GROUP

Very good diversification

The 3 months correlation between Pentair and CATLIN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and CATLIN GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CATLIN GROUP 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 CATLIN GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CATLIN GROUP has no effect on the direction of Pentair PLC i.e., Pentair PLC and CATLIN GROUP go up and down completely randomly.

Pair Corralation between Pentair PLC and CATLIN GROUP

Assuming the 90 days trading horizon Pentair PLC is expected to generate 1.88 times more return on investment than CATLIN GROUP. However, Pentair PLC is 1.88 times more volatile than CATLIN GROUP . It trades about 0.26 of its potential returns per unit of risk. CATLIN GROUP is currently generating about -0.06 per unit of risk. If you would invest  8,540  in Pentair PLC on April 20, 2025 and sell it today you would earn a total of  2,081  from holding Pentair PLC or generate 24.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Pentair PLC  vs.  CATLIN GROUP

Pentair PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

CATLIN GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentair PLC and CATLIN GROUP

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

The idea behind Pentair PLC and CATLIN GROUP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.