Correlation Between Pentair PLC and ECA Marcellus

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

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

Diversification Opportunities for Pentair PLC and ECA Marcellus

0.12

Correlation Coefficient

Pentair PLC  ECA Marcellus

Average diversification

The 3 months correlation between Pentair and ECA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and ECA Marcellus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECA Marcellus Trust 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 ECA Marcellus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECA Marcellus Trust has no effect on the direction of Pentair PLC i.e., Pentair PLC and ECA Marcellus go up and down completely randomly.

Pair Corralation between Pentair PLC and ECA Marcellus

If you would invest  47.00  in ECA Marcellus Trust on January 24, 2024 and sell it today you would earn a total of  0.00  from holding ECA Marcellus Trust or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Pentair PLC  vs.  ECA Marcellus Trust

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. Even with relatively weak basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ECA Marcellus Trust

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ECA Marcellus Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, ECA Marcellus displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and ECA Marcellus

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

The idea behind Pentair PLC and ECA Marcellus Trust 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.