Correlation Between Eaton Corp and GoldMining
Can any of the company-specific risk be diversified away by investing in both Eaton Corp and GoldMining 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 GoldMining 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 GoldMining, you can compare the effects of market volatilities on Eaton Corp and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Corp and GoldMining.
Diversification Opportunities for Eaton Corp and GoldMining
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Eaton and GoldMining is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Corp PLC and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Eaton Corp i.e., Eaton Corp and GoldMining go up and down completely randomly.
Pair Corralation between Eaton Corp and GoldMining
Assuming the 90 days trading horizon Eaton Corp PLC is expected to generate 0.41 times more return on investment than GoldMining. However, Eaton Corp PLC is 2.45 times less risky than GoldMining. It trades about 0.11 of its potential returns per unit of risk. GoldMining is currently generating about -0.03 per unit of risk. If you would invest 15,791 in Eaton Corp PLC on August 27, 2024 and sell it today you would earn a total of 22,121 from holding Eaton Corp PLC or generate 140.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 35.48% |
| Values | Daily Returns |
Eaton Corp PLC vs. GoldMining
Performance |
| Timeline |
| Eaton Corp PLC |
| GoldMining |
Eaton Corp and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Corp and GoldMining
The main advantage of trading using opposite Eaton Corp and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Corp position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.| Eaton Corp vs. GoldMining | Eaton Corp vs. Air Products Chemicals | Eaton Corp vs. Tatton Asset Management | Eaton Corp vs. Oakley Capital Investments |
| GoldMining vs. Samsung Electronics Co | GoldMining vs. Samsung Electronics Co | GoldMining vs. Hyundai Motor | GoldMining vs. Toyota Motor Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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