Correlation Between Pentair PLC and Fidelity Freedom

Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Fidelity Freedom 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 Freedom 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 Freedom Blend, you can compare the effects of market volatilities on Pentair PLC and Fidelity Freedom 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 Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Fidelity Freedom.

Diversification Opportunities for Pentair PLC and Fidelity Freedom

0.92

Correlation Coefficient

Pentair PLC  Fidelity Freedom

Almost no diversification

The 3 months correlation between Pentair and Fidelity is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Fidelity Freedom Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Blend 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 Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom Blend has no effect on the direction of Pentair PLC i.e., Pentair PLC and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Pentair PLC and Fidelity Freedom

Considering the 90-day investment horizon Pentair PLC is expected to under-perform the Fidelity Freedom. In addition to that, Pentair PLC is 1.95 times more volatile than Fidelity Freedom Blend. It trades about -0.19 of its total potential returns per unit of risk. Fidelity Freedom Blend is currently generating about -0.2 per unit of volatility. If you would invest  1,087  in Fidelity Freedom Blend on January 26, 2024 and sell it today you would lose (24.00) from holding Fidelity Freedom Blend or give up 2.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Pentair PLC  vs.  Fidelity Freedom Blend

Pentair PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 9 (%) 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.

Fidelity Freedom Blend

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Blend are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pentair PLC and Fidelity Freedom

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

The idea behind Pentair PLC and Fidelity Freedom Blend 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.