Correlation Between EatonPLC and McPhy Energy
Can any of the company-specific risk be diversified away by investing in both EatonPLC and McPhy 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 EatonPLC and McPhy 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 McPhy Energy SA, you can compare the effects of market volatilities on EatonPLC and McPhy 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 EatonPLC with a short position of McPhy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EatonPLC and McPhy Energy.
Diversification Opportunities for EatonPLC and McPhy Energy
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EatonPLC and McPhy is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and McPhy Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McPhy Energy SA 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 McPhy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McPhy Energy SA has no effect on the direction of EatonPLC i.e., EatonPLC and McPhy Energy go up and down completely randomly.
Pair Corralation between EatonPLC and McPhy Energy
Assuming the 90 days horizon Eaton PLC is expected to generate 0.39 times more return on investment than McPhy Energy. However, Eaton PLC is 2.56 times less risky than McPhy Energy. It trades about 0.37 of its potential returns per unit of risk. McPhy Energy SA is currently generating about -0.46 per unit of risk. If you would invest 30,576 in Eaton PLC on September 2, 2024 and sell it today you would earn a total of 5,024 from holding Eaton PLC or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. McPhy Energy SA
Performance |
| Timeline |
| Eaton PLC |
| McPhy Energy SA |
EatonPLC and McPhy Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EatonPLC and McPhy Energy
The main advantage of trading using opposite EatonPLC and McPhy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EatonPLC position performs unexpectedly, McPhy 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 McPhy Energy will offset losses from the drop in McPhy Energy's long position.| EatonPLC vs. DELTA AIR LINES | EatonPLC vs. Entravision Communications | EatonPLC vs. Cogent Communications Holdings | EatonPLC vs. Verizon Communications |
| McPhy Energy vs. ABB | McPhy Energy vs. Emerson Electric Co | McPhy Energy vs. Superior Plus Corp | McPhy Energy vs. NMI Holdings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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