Correlation Between Eaton PLC and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and FuelCell Energy 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 FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and FuelCell Energy, you can compare the effects of market volatilities on Eaton PLC and FuelCell Energy 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and FuelCell Energy.
Diversification Opportunities for Eaton PLC and FuelCell Energy
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and FuelCell is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Eaton PLC i.e., Eaton PLC and FuelCell Energy go up and down completely randomly.
Pair Corralation between Eaton PLC and FuelCell Energy
Assuming the 90 days horizon Eaton PLC is expected to under-perform the FuelCell Energy. But the stock apears to be less risky and, when comparing its historical volatility, Eaton PLC is 4.78 times less risky than FuelCell Energy. The stock trades about -0.27 of its potential returns per unit of risk. The FuelCell Energy is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,020 in FuelCell Energy on September 24, 2024 and sell it today you would lose (121.00) from holding FuelCell Energy or give up 11.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Eaton PLC vs. FuelCell Energy
Performance |
| Timeline |
| Eaton PLC |
| FuelCell Energy |
Eaton PLC and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and FuelCell Energy
The main advantage of trading using opposite Eaton PLC and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, FuelCell Energy 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 FuelCell Energy will offset losses from the drop in FuelCell Energy's long position.| Eaton PLC vs. Honeywell International | Eaton PLC vs. Schneider Electric SE | Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. ABB |
| FuelCell Energy vs. DIVERSIFIED ROYALTY | FuelCell Energy vs. BJs Wholesale Club | FuelCell Energy vs. COSTCO WHOLESALE CDR | FuelCell Energy vs. Vastned Retail NV |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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