Correlation Between EatonPLC and Air Lease
Can any of the company-specific risk be diversified away by investing in both EatonPLC and Air Lease 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 Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Air Lease, you can compare the effects of market volatilities on EatonPLC and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of EatonPLC and Air Lease.
Diversification Opportunities for EatonPLC and Air Lease
Very poor diversification
The 3 months correlation between EatonPLC and Air is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of EatonPLC i.e., EatonPLC and Air Lease go up and down completely randomly.
Pair Corralation between EatonPLC and Air Lease
Assuming the 90 days horizon Eaton PLC is expected to generate 1.02 times more return on investment than Air Lease. However, EatonPLC is 1.02 times more volatile than Air Lease. It trades about 0.12 of its potential returns per unit of risk. Air Lease is currently generating about 0.08 per unit of risk. If you would invest 19,561 in Eaton PLC on September 1, 2024 and sell it today you would earn a total of 16,039 from holding Eaton PLC or generate 81.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.64% |
| Values | Daily Returns |
Eaton PLC vs. Air Lease
Performance |
| Timeline |
| Eaton PLC |
| Air Lease |
EatonPLC and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EatonPLC and Air Lease
The main advantage of trading using opposite EatonPLC and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EatonPLC position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.| EatonPLC vs. INDOFOOD AGRI RES | EatonPLC vs. Tyson Foods | EatonPLC vs. NISSIN FOODS HLDGS | EatonPLC vs. Astral Foods Limited |
| Air Lease vs. Caseys General Stores | Air Lease vs. Ping An Insurance | Air Lease vs. Selective Insurance Group | Air Lease vs. The Hanover Insurance |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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