Correlation Between Eaton PLC and Aumann AG
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Aumann AG 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 Aumann AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Aumann AG, you can compare the effects of market volatilities on Eaton PLC and Aumann AG 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 Aumann AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Aumann AG.
Diversification Opportunities for Eaton PLC and Aumann AG
Pay attention - limited upside
The 3 months correlation between Eaton and Aumann is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Aumann AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aumann AG 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 Aumann AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aumann AG has no effect on the direction of Eaton PLC i.e., Eaton PLC and Aumann AG go up and down completely randomly.
Pair Corralation between Eaton PLC and Aumann AG
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.61 times more return on investment than Aumann AG. However, Eaton PLC is 1.65 times less risky than Aumann AG. It trades about 0.13 of its potential returns per unit of risk. Aumann AG is currently generating about -0.06 per unit of risk. If you would invest 21,379 in Eaton PLC on September 1, 2024 and sell it today you would earn a total of 16,163 from holding Eaton PLC or generate 75.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 58.36% |
| Values | Daily Returns |
Eaton PLC vs. Aumann AG
Performance |
| Timeline |
| Eaton PLC |
| Aumann AG |
Eaton PLC and Aumann AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Aumann AG
The main advantage of trading using opposite Eaton PLC and Aumann AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Aumann AG 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 Aumann AG will offset losses from the drop in Aumann AG's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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