Correlation Between Eaton PLC and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Trane Technologies 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 Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Trane Technologies plc, you can compare the effects of market volatilities on Eaton PLC and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Trane Technologies.
Diversification Opportunities for Eaton PLC and Trane Technologies
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eaton and Trane is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Eaton PLC i.e., Eaton PLC and Trane Technologies go up and down completely randomly.
Pair Corralation between Eaton PLC and Trane Technologies
Assuming the 90 days horizon Eaton PLC is expected to generate 1.21 times more return on investment than Trane Technologies. However, Eaton PLC is 1.21 times more volatile than Trane Technologies plc. It trades about 0.2 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.21 per unit of risk. If you would invest 32,136 in Eaton PLC on August 29, 2024 and sell it today you would earn a total of 3,639 from holding Eaton PLC or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Trane Technologies plc
Performance |
| Timeline |
| Eaton PLC |
| Trane Technologies plc |
Eaton PLC and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Trane Technologies
The main advantage of trading using opposite Eaton PLC and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' long position.| Eaton PLC vs. Mobilezone Holding AG | Eaton PLC vs. Luckin Coffee | Eaton PLC vs. ETFS Coffee ETC | Eaton PLC vs. Iridium Communications |
| Trane Technologies vs. ABB | Trane Technologies vs. Superior Plus Corp | Trane Technologies vs. NMI Holdings | Trane Technologies vs. SIVERS SEMICONDUCTORS AB |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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