Correlation Between Eaton PLC and New Residential
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and New Residential 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 PLC and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and New Residential Investment, you can compare the effects of market volatilities on Eaton PLC and New Residential 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 PLC with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and New Residential.
Diversification Opportunities for Eaton PLC and New Residential
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and New is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Eaton 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 Eaton PLC are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Eaton PLC i.e., Eaton PLC and New Residential go up and down completely randomly.
Pair Corralation between Eaton PLC and New Residential
Assuming the 90 days horizon Eaton PLC is expected to under-perform the New Residential. In addition to that, Eaton PLC is 2.62 times more volatile than New Residential Investment. It trades about -0.19 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.09 per unit of volatility. If you would invest 1,042 in New Residential Investment on December 11, 2024 and sell it today you would earn a total of 46.00 from holding New Residential Investment or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. New Residential Investment
Performance |
| Timeline |
| Eaton PLC |
| New Residential Inve |
Eaton PLC and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and New Residential
The main advantage of trading using opposite Eaton PLC and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Eaton PLC vs. BANK OF CHINA | Eaton PLC vs. Cembra Money Bank | Eaton PLC vs. Varengold Bank AG | Eaton PLC vs. Beta Systems Software |
| New Residential vs. GOLD ROAD RES | New Residential vs. Fast Retailing Co | New Residential vs. Liberty Broadband | New Residential vs. Caseys General Stores |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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