Correlation Between China Automotive and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both China Automotive and Eaton PLC 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 China Automotive and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Automotive Systems and Eaton PLC, you can compare the effects of market volatilities on China Automotive and Eaton PLC 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 China Automotive with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Automotive and Eaton PLC.
Diversification Opportunities for China Automotive and Eaton PLC
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Eaton is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Automotive Systems and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and China Automotive 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 China Automotive Systems are associated (or correlated) with Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of China Automotive i.e., China Automotive and Eaton PLC go up and down completely randomly.
Pair Corralation between China Automotive and Eaton PLC
Given the investment horizon of 90 days China Automotive Systems is expected to generate 1.08 times more return on investment than Eaton PLC. However, China Automotive is 1.08 times more volatile than Eaton PLC. It trades about 0.28 of its potential returns per unit of risk. Eaton PLC is currently generating about -0.2 per unit of risk. If you would invest 416.00 in China Automotive Systems on November 27, 2024 and sell it today you would earn a total of 43.00 from holding China Automotive Systems or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Automotive Systems vs. Eaton PLC
Performance |
| Timeline |
| China Automotive Systems |
| Eaton PLC |
China Automotive and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Automotive and Eaton PLC
The main advantage of trading using opposite China Automotive and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Automotive position performs unexpectedly, Eaton PLC 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.| China Automotive vs. Dorman Products | China Automotive vs. Monro Muffler Brake | China Automotive vs. Standard Motor Products | China Automotive vs. Stoneridge |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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