Correlation Between Pentair Plc and ELECTRONIC ARTS

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

By analyzing existing cross correlation between Pentair plc and ELECTRONIC ARTS, you can compare the effects of market volatilities on Pentair Plc and ELECTRONIC ARTS 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 ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair Plc and ELECTRONIC ARTS.

Diversification Opportunities for Pentair Plc and ELECTRONIC ARTS

-0.27

Correlation Coefficient

Pentair Plc  ELECTRONIC ARTS

Very good diversification

The 3 months correlation between Pentair and ELECTRONIC is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS 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 ELECTRONIC ARTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRONIC ARTS has no effect on the direction of Pentair Plc i.e., Pentair Plc and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between Pentair Plc and ELECTRONIC ARTS

Assuming the 90 days horizon Pentair plc is expected to generate 0.87 times more return on investment than ELECTRONIC ARTS. However, Pentair plc is 1.15 times less risky than ELECTRONIC ARTS. It trades about 0.07 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.01 per unit of risk. If you would invest  8,155  in Pentair plc on May 6, 2025 and sell it today you would earn a total of  541.00  from holding Pentair plc or generate 6.63% return on investment over 90 days.

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

Pentair plc  vs.  ELECTRONIC ARTS

Pentair plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in September 2025.

ELECTRONIC ARTS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELECTRONIC ARTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ELECTRONIC ARTS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentair Plc and ELECTRONIC ARTS

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

The idea behind Pentair plc and ELECTRONIC ARTS 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.