Correlation Between Eaton PLC and ALERION CLEANPOWER
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and ALERION CLEANPOWER 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 ALERION CLEANPOWER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and ALERION CLEANPOWER, you can compare the effects of market volatilities on Eaton PLC and ALERION CLEANPOWER 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 ALERION CLEANPOWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and ALERION CLEANPOWER.
Diversification Opportunities for Eaton PLC and ALERION CLEANPOWER
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eaton and ALERION is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of Eaton PLC i.e., Eaton PLC and ALERION CLEANPOWER go up and down completely randomly.
Pair Corralation between Eaton PLC and ALERION CLEANPOWER
Assuming the 90 days horizon Eaton PLC is expected to generate 0.83 times more return on investment than ALERION CLEANPOWER. However, Eaton PLC is 1.21 times less risky than ALERION CLEANPOWER. It trades about 0.1 of its potential returns per unit of risk. ALERION CLEANPOWER is currently generating about -0.04 per unit of risk. If you would invest 14,149 in Eaton PLC on September 23, 2024 and sell it today you would earn a total of 18,471 from holding Eaton PLC or generate 130.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. ALERION CLEANPOWER
Performance |
| Timeline |
| Eaton PLC |
| ALERION CLEANPOWER |
Eaton PLC and ALERION CLEANPOWER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and ALERION CLEANPOWER
The main advantage of trading using opposite Eaton PLC and ALERION CLEANPOWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, ALERION CLEANPOWER 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 ALERION CLEANPOWER will offset losses from the drop in ALERION CLEANPOWER'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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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