Correlation Between GOLD ROAD and EatonPLC
Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and EatonPLC 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 GOLD ROAD and EatonPLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOLD ROAD RES and Eaton PLC, you can compare the effects of market volatilities on GOLD ROAD and EatonPLC 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 GOLD ROAD with a short position of EatonPLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and EatonPLC.
Diversification Opportunities for GOLD ROAD and EatonPLC
Weak diversification
The 3 months correlation between GOLD and EatonPLC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with EatonPLC. 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 GOLD ROAD i.e., GOLD ROAD and EatonPLC go up and down completely randomly.
Pair Corralation between GOLD ROAD and EatonPLC
Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.65 times more return on investment than EatonPLC. However, GOLD ROAD is 1.65 times more volatile than Eaton PLC. It trades about 0.16 of its potential returns per unit of risk. Eaton PLC is currently generating about -0.09 per unit of risk. If you would invest 109.00 in GOLD ROAD RES on October 12, 2024 and sell it today you would earn a total of 18.00 from holding GOLD ROAD RES or generate 16.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
GOLD ROAD RES vs. Eaton PLC
Performance |
| Timeline |
| GOLD ROAD RES |
| Eaton PLC |
GOLD ROAD and EatonPLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOLD ROAD and EatonPLC
The main advantage of trading using opposite GOLD ROAD and EatonPLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD position performs unexpectedly, EatonPLC 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 EatonPLC will offset losses from the drop in EatonPLC's long position.| GOLD ROAD vs. OFFICE DEPOT | GOLD ROAD vs. Fukuyama Transporting Co | GOLD ROAD vs. ALERION CLEANPOWER | GOLD ROAD vs. The Home Depot |
| EatonPLC vs. GOLD ROAD RES | EatonPLC vs. RETAIL FOOD GROUP | EatonPLC vs. TITANIUM TRANSPORTGROUP | EatonPLC vs. The Trade Desk |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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