Correlation Between Eaton Plc and CVS Health
Can any of the company-specific risk be diversified away by investing in both Eaton Plc and CVS Health 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 CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton plc and CVS Health, you can compare the effects of market volatilities on Eaton Plc and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Plc and CVS Health.
Diversification Opportunities for Eaton Plc and CVS Health
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eaton and CVS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eaton plc and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Eaton Plc i.e., Eaton Plc and CVS Health go up and down completely randomly.
Pair Corralation between Eaton Plc and CVS Health
Assuming the 90 days trading horizon Eaton plc is expected to generate 0.49 times more return on investment than CVS Health. However, Eaton plc is 2.04 times less risky than CVS Health. It trades about 0.42 of its potential returns per unit of risk. CVS Health is currently generating about 0.13 per unit of risk. If you would invest 13,553 in Eaton plc on September 2, 2024 and sell it today you would earn a total of 2,547 from holding Eaton plc or generate 18.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton plc vs. CVS Health
Performance |
| Timeline |
| Eaton plc |
| CVS Health |
Eaton Plc and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Plc and CVS Health
The main advantage of trading using opposite Eaton Plc and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Plc position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Eaton Plc vs. Planet Fitness | Eaton Plc vs. Deutsche Bank Aktiengesellschaft | Eaton Plc vs. CVS Health | Eaton Plc vs. Bread Financial Holdings |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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