Correlation Between Eaton PLC and Continental
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Continental 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 Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Camden Property Trust, you can compare the effects of market volatilities on Eaton PLC and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Continental.
Diversification Opportunities for Eaton PLC and Continental
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eaton and Continental is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Camden Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camden Property Trust 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camden Property Trust has no effect on the direction of Eaton PLC i.e., Eaton PLC and Continental go up and down completely randomly.
Pair Corralation between Eaton PLC and Continental
Assuming the 90 days horizon Eaton PLC is expected to generate 1.63 times more return on investment than Continental. However, Eaton PLC is 1.63 times more volatile than Camden Property Trust. It trades about 0.05 of its potential returns per unit of risk. Camden Property Trust is currently generating about 0.01 per unit of risk. If you would invest 31,389 in Eaton PLC on September 23, 2024 and sell it today you would earn a total of 1,231 from holding Eaton PLC or generate 3.92% 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. Camden Property Trust
Performance |
| Timeline |
| Eaton PLC |
| Camden Property Trust |
Eaton PLC and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Continental
The main advantage of trading using opposite Eaton PLC and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Eaton PLC vs. Honeywell International | Eaton PLC vs. Schneider Electric SE | Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. ABB |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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