Correlation Between EatonPLC and Dow Jones
Can any of the company-specific risk be diversified away by investing in both EatonPLC and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Dow Jones Industrial, you can compare the effects of market volatilities on EatonPLC and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of EatonPLC and Dow Jones.
Diversification Opportunities for EatonPLC and Dow Jones
Almost no diversification
The 3 months correlation between EatonPLC and Dow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of EatonPLC i.e., EatonPLC and Dow Jones go up and down completely randomly.
Pair Corralation between EatonPLC and Dow Jones
Assuming the 90 days horizon Eaton PLC is expected to generate 2.04 times more return on investment than Dow Jones. However, EatonPLC is 2.04 times more volatile than Dow Jones Industrial. It trades about 0.42 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 29,669 in Eaton PLC on September 1, 2024 and sell it today you would earn a total of 5,931 from holding Eaton PLC or generate 19.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Eaton PLC vs. Dow Jones Industrial
Performance |
| Timeline |
EatonPLC and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Eaton PLC
Pair trading matchups for EatonPLC
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with EatonPLC and Dow Jones
The main advantage of trading using opposite EatonPLC and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EatonPLC position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| EatonPLC vs. INDOFOOD AGRI RES | EatonPLC vs. Tyson Foods | EatonPLC vs. NISSIN FOODS HLDGS | EatonPLC vs. Astral Foods Limited |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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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