Correlation Between EatonPLC and USWE SPORTS
Can any of the company-specific risk be diversified away by investing in both EatonPLC and USWE SPORTS 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 EatonPLC and USWE SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and USWE SPORTS AB, you can compare the effects of market volatilities on EatonPLC and USWE SPORTS 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 EatonPLC with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of EatonPLC and USWE SPORTS.
Diversification Opportunities for EatonPLC and USWE SPORTS
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EatonPLC and USWE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and EatonPLC 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 USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of EatonPLC i.e., EatonPLC and USWE SPORTS go up and down completely randomly.
Pair Corralation between EatonPLC and USWE SPORTS
Assuming the 90 days horizon Eaton PLC is expected to generate 0.44 times more return on investment than USWE SPORTS. However, Eaton PLC is 2.26 times less risky than USWE SPORTS. It trades about 0.11 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about -0.01 per unit of risk. If you would invest 16,983 in Eaton PLC on September 2, 2024 and sell it today you would earn a total of 18,617 from holding Eaton PLC or generate 109.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. USWE SPORTS AB
Performance |
| Timeline |
| Eaton PLC |
| USWE SPORTS AB |
EatonPLC and USWE SPORTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EatonPLC and USWE SPORTS
The main advantage of trading using opposite EatonPLC and USWE SPORTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EatonPLC position performs unexpectedly, USWE SPORTS 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 USWE SPORTS will offset losses from the drop in USWE SPORTS's long position.| EatonPLC vs. DELTA AIR LINES | EatonPLC vs. Entravision Communications | EatonPLC vs. Cogent Communications Holdings | EatonPLC vs. Verizon Communications |
| USWE SPORTS vs. Li Ning Company | USWE SPORTS vs. Trip Group Limited | USWE SPORTS vs. Superior Plus Corp | USWE SPORTS vs. NMI Holdings |
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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