Correlation Between Eaton Corp and Take Two
Can any of the company-specific risk be diversified away by investing in both Eaton Corp and Take Two 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 Eaton Corp and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton Corp PLC and Take Two Interactive Software, you can compare the effects of market volatilities on Eaton Corp and Take Two 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 Eaton Corp with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Corp and Take Two.
Diversification Opportunities for Eaton Corp and Take Two
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eaton and Take is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Corp PLC and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive and Eaton Corp 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 Eaton Corp PLC are associated (or correlated) with Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Eaton Corp i.e., Eaton Corp and Take Two go up and down completely randomly.
Pair Corralation between Eaton Corp and Take Two
Assuming the 90 days trading horizon Eaton Corp PLC is expected to generate 1.28 times more return on investment than Take Two. However, Eaton Corp is 1.28 times more volatile than Take Two Interactive Software. It trades about 0.06 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.07 per unit of risk. If you would invest 32,531 in Eaton Corp PLC on September 3, 2024 and sell it today you would earn a total of 4,874 from holding Eaton Corp PLC or generate 14.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton Corp PLC vs. Take Two Interactive Software
Performance |
| Timeline |
| Eaton Corp PLC |
| Take Two Interactive |
Eaton Corp and Take Two Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Corp and Take Two
The main advantage of trading using opposite Eaton Corp and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Corp position performs unexpectedly, Take Two 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 Take Two will offset losses from the drop in Take Two's long position.| Eaton Corp vs. Target Healthcare REIT | Eaton Corp vs. Inspiration Healthcare Group | Eaton Corp vs. Optima Health plc | Eaton Corp vs. Zurich Insurance Group |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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