Correlation Between Eaton PLC and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Iridium Communications, you can compare the effects of market volatilities on Eaton PLC and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Iridium Communications.
Diversification Opportunities for Eaton PLC and Iridium Communications
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and Iridium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Eaton PLC i.e., Eaton PLC and Iridium Communications go up and down completely randomly.
Pair Corralation between Eaton PLC and Iridium Communications
Assuming the 90 days horizon Eaton PLC is expected to under-perform the Iridium Communications. But the stock apears to be less risky and, when comparing its historical volatility, Eaton PLC is 2.26 times less risky than Iridium Communications. The stock trades about -0.2 of its potential returns per unit of risk. The Iridium Communications is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,920 in Iridium Communications on November 27, 2024 and sell it today you would earn a total of 116.00 from holding Iridium Communications or generate 3.97% 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. Iridium Communications
Performance |
| Timeline |
| Eaton PLC |
| Iridium Communications |
Eaton PLC and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Iridium Communications
The main advantage of trading using opposite Eaton PLC and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Eaton PLC vs. Infrastrutture Wireless Italiane | Eaton PLC vs. Vishay Intertechnology | Eaton PLC vs. Tower One Wireless | Eaton PLC vs. Cognizant Technology Solutions |
| Iridium Communications vs. Thai Beverage Public | Iridium Communications vs. CanSino Biologics | Iridium Communications vs. NORTHEAST UTILITIES | Iridium Communications vs. Ebro Foods SA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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