Correlation Between ATS and Pentair PLC

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

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

Diversification Opportunities for ATS and Pentair PLC

-0.67

Correlation Coefficient

ATS  Pentair PLC

Excellent diversification

The 3 months correlation between ATS and Pentair is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ATS Corp. and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and ATS 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 ATS Corporation 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 ATS i.e., ATS and Pentair PLC go up and down completely randomly.

Pair Corralation between ATS and Pentair PLC

Considering the 90-day investment horizon ATS Corporation is expected to generate 2.41 times more return on investment than Pentair PLC. However, ATS is 2.41 times more volatile than Pentair PLC. It trades about -0.06 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.23 per unit of risk. If you would invest  3,355  in ATS Corporation on February 3, 2024 and sell it today you would lose (108.00) from holding ATS Corporation or give up 3.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ATS Corp.  vs.  Pentair PLC

ATS Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATS Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pentair PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ATS and Pentair PLC

The main advantage of trading using opposite ATS and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATS 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 ATS Corporation 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.