Correlation Between Pentair PLC and United Rentals
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and United Rentals 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 United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and United Rentals, you can compare the effects of market volatilities on Pentair PLC and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and United Rentals.
Diversification Opportunities for Pentair PLC and United Rentals
0.92 | Correlation Coefficient |
Almost no diversification
The 24 months correlation between Pentair and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Pentair PLC i.e., Pentair PLC and United Rentals go up and down completely randomly.
Pair Corralation between Pentair PLC and United Rentals
Considering the 90-day investment horizon Pentair PLC is expected to generate 0.88 times more return on investment than United Rentals. However, Pentair PLC is 1.14 times less risky than United Rentals. It trades about 0.37 of its potential returns per unit of risk. United Rentals is currently generating about 0.15 per unit of risk. If you would invest 7,667 in Pentair PLC on December 30, 2023 and sell it today you would earn a total of 877.00 from holding Pentair PLC or generate 11.44% return on investment over 90 days.
Time Period | 24 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Pentair PLC vs. United Rentals
Performance |
Timeline |
Pentair PLC |
United Rentals |
Pentair PLC and United Rentals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pentair PLC and United Rentals
The main advantage of trading using opposite Pentair PLC and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.Pentair PLC vs. Hillenbrand | Pentair PLC vs. Paul Mueller Co | Pentair PLC vs. Babcock Wilcox Enterprises | Pentair PLC vs. Parker Hannifin |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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