Correlation Between Eaton Plc and Deutsche Bank
Can any of the company-specific risk be diversified away by investing in both Eaton Plc and Deutsche Bank 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 Deutsche Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton plc and Deutsche Bank Aktiengesellschaft, you can compare the effects of market volatilities on Eaton Plc and Deutsche Bank 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 Deutsche Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Plc and Deutsche Bank.
Diversification Opportunities for Eaton Plc and Deutsche Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eaton and Deutsche is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eaton plc and Deutsche Bank Aktiengesellscha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank Aktien 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 Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank Aktien has no effect on the direction of Eaton Plc i.e., Eaton Plc and Deutsche Bank go up and down completely randomly.
Pair Corralation between Eaton Plc and Deutsche Bank
Assuming the 90 days trading horizon Eaton plc is expected to generate 1.03 times more return on investment than Deutsche Bank. However, Eaton Plc is 1.03 times more volatile than Deutsche Bank Aktiengesellschaft. It trades about 0.42 of its potential returns per unit of risk. Deutsche Bank Aktiengesellschaft is currently generating about 0.02 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton plc vs. Deutsche Bank Aktiengesellscha
Performance |
| Timeline |
| Eaton plc |
| Deutsche Bank Aktien |
Eaton Plc and Deutsche Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Plc and Deutsche Bank
The main advantage of trading using opposite Eaton Plc and Deutsche Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Plc position performs unexpectedly, Deutsche Bank 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 Deutsche Bank will offset losses from the drop in Deutsche Bank'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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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