Correlation Between Eaton PLC and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and LPKF Laser 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 LPKF Laser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and LPKF Laser Electronics, you can compare the effects of market volatilities on Eaton PLC and LPKF Laser 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 LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and LPKF Laser.
Diversification Opportunities for Eaton PLC and LPKF Laser
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and LPKF is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of Eaton PLC i.e., Eaton PLC and LPKF Laser go up and down completely randomly.
Pair Corralation between Eaton PLC and LPKF Laser
Assuming the 90 days horizon Eaton PLC is expected to generate 32.07 times less return on investment than LPKF Laser. But when comparing it to its historical volatility, Eaton PLC is 2.42 times less risky than LPKF Laser. It trades about 0.0 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 845.00 in LPKF Laser Electronics on October 26, 2024 and sell it today you would earn a total of 55.00 from holding LPKF Laser Electronics or generate 6.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. LPKF Laser Electronics
Performance |
| Timeline |
| Eaton PLC |
| LPKF Laser Electronics |
Eaton PLC and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and LPKF Laser
The main advantage of trading using opposite Eaton PLC and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, LPKF Laser 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 LPKF Laser will offset losses from the drop in LPKF Laser's long position.| Eaton PLC vs. AGNC INVESTMENT | Eaton PLC vs. New Residential Investment | Eaton PLC vs. GigaMedia | Eaton PLC vs. SQUIRREL MEDIA SA |
| LPKF Laser vs. Honeywell International | LPKF Laser vs. Illinois Tool Works | LPKF Laser vs. Eaton PLC | LPKF Laser vs. ABB |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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