Correlation Between EatonPLC and LPKF Laser
Can any of the company-specific risk be diversified away by investing in both EatonPLC 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 EatonPLC 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 EatonPLC 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 EatonPLC with a short position of LPKF Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of EatonPLC and LPKF Laser.
Diversification Opportunities for EatonPLC and LPKF Laser
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EatonPLC and LPKF is -0.51. 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 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 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 EatonPLC i.e., EatonPLC and LPKF Laser go up and down completely randomly.
Pair Corralation between EatonPLC and LPKF Laser
Assuming the 90 days horizon Eaton PLC is expected to generate 0.71 times more return on investment than LPKF Laser. However, Eaton PLC is 1.41 times less risky than LPKF Laser. It trades about 0.1 of its potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.01 per unit of risk. If you would invest 14,298 in Eaton PLC on October 19, 2024 and sell it today you would earn a total of 18,707 from holding Eaton PLC or generate 130.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. LPKF Laser Electronics
Performance |
| Timeline |
| Eaton PLC |
| LPKF Laser Electronics |
EatonPLC and LPKF Laser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EatonPLC and LPKF Laser
The main advantage of trading using opposite EatonPLC and LPKF Laser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EatonPLC 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.| EatonPLC vs. ABB | EatonPLC vs. 3M Company | EatonPLC vs. Emerson Electric Co | EatonPLC vs. Trane Technologies plc |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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