Correlation Between Eaton PLC and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Illinois Tool 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 Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Illinois Tool Works, you can compare the effects of market volatilities on Eaton PLC and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Illinois Tool.
Diversification Opportunities for Eaton PLC and Illinois Tool
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eaton and Illinois is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Eaton PLC i.e., Eaton PLC and Illinois Tool go up and down completely randomly.
Pair Corralation between Eaton PLC and Illinois Tool
Assuming the 90 days horizon Eaton PLC is expected to under-perform the Illinois Tool. In addition to that, Eaton PLC is 2.86 times more volatile than Illinois Tool Works. It trades about -0.11 of its total potential returns per unit of risk. Illinois Tool Works is currently generating about 0.0 per unit of volatility. If you would invest 23,990 in Illinois Tool Works on November 8, 2024 and sell it today you would lose (50.00) from holding Illinois Tool Works or give up 0.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Illinois Tool Works
Performance |
| Timeline |
| Eaton PLC |
| Illinois Tool Works |
Eaton PLC and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Illinois Tool
The main advantage of trading using opposite Eaton PLC and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Eaton PLC vs. Cal Maine Foods | Eaton PLC vs. Nomad Foods | Eaton PLC vs. PATTIES FOODS | Eaton PLC vs. NH Foods |
| Illinois Tool vs. DISTRICT METALS | Illinois Tool vs. PARKEN Sport Entertainment | Illinois Tool vs. ANTA SPORTS PRODUCT | Illinois Tool vs. TITANIUM TRANSPORTGROUP |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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