Correlation Between Dover and Pentair PLC

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

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

Diversification Opportunities for Dover and Pentair PLC

0.88

Correlation Coefficient

Dover  Pentair PLC

Very poor diversification

The 3 months correlation between Dover and Pentair is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Dover 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 Dover 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 Dover i.e., Dover and Pentair PLC go up and down completely randomly.

Pair Corralation between Dover and Pentair PLC

Considering the 90-day investment horizon Dover is expected to generate 1.52 times more return on investment than Pentair PLC. However, Dover is 1.52 times more volatile than Pentair PLC. It trades about 0.07 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.25 per unit of risk. If you would invest  17,584  in Dover on February 5, 2024 and sell it today you would earn a total of  320.00  from holding Dover or generate 1.82% return on investment over 90 days.

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

Dover  vs.  Pentair PLC

Dover

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Dover may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pentair PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Dover and Pentair PLC

The main advantage of trading using opposite Dover and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover 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 Dover 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.