Correlation Between Eaton Plc and BIONTECH
Can any of the company-specific risk be diversified away by investing in both Eaton Plc and BIONTECH 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 BIONTECH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton plc and BIONTECH SE DRN, you can compare the effects of market volatilities on Eaton Plc and BIONTECH 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 BIONTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Plc and BIONTECH.
Diversification Opportunities for Eaton Plc and BIONTECH
Very weak diversification
The 3 months correlation between Eaton and BIONTECH is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eaton plc and BIONTECH SE DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIONTECH SE DRN 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 BIONTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIONTECH SE DRN has no effect on the direction of Eaton Plc i.e., Eaton Plc and BIONTECH go up and down completely randomly.
Pair Corralation between Eaton Plc and BIONTECH
Assuming the 90 days trading horizon Eaton plc is expected to generate 0.57 times more return on investment than BIONTECH. However, Eaton plc is 1.76 times less risky than BIONTECH. It trades about 0.4 of its potential returns per unit of risk. BIONTECH SE DRN is currently generating about 0.14 per unit of risk. If you would invest 13,553 in Eaton plc on September 5, 2024 and sell it today you would earn a total of 2,527 from holding Eaton plc or generate 18.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton plc vs. BIONTECH SE DRN
Performance |
| Timeline |
| Eaton plc |
| BIONTECH SE DRN |
Eaton Plc and BIONTECH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Plc and BIONTECH
The main advantage of trading using opposite Eaton Plc and BIONTECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Plc position performs unexpectedly, BIONTECH 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 BIONTECH will offset losses from the drop in BIONTECH's long position.| Eaton Plc vs. BIONTECH SE DRN | Eaton Plc vs. T Mobile | Eaton Plc vs. Unity Software | Eaton Plc vs. Raytheon Technologies |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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