Correlation Between Eaton PLC and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Babcock Wilcox 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 Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Eaton PLC and Babcock Wilcox 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 Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Babcock Wilcox.
Diversification Opportunities for Eaton PLC and Babcock Wilcox
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eaton and Babcock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter 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 Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of Eaton PLC i.e., Eaton PLC and Babcock Wilcox go up and down completely randomly.
Pair Corralation between Eaton PLC and Babcock Wilcox
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.27 times more return on investment than Babcock Wilcox. However, Eaton PLC is 3.69 times less risky than Babcock Wilcox. It trades about 0.18 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.1 per unit of risk. If you would invest 34,458 in Eaton PLC on August 30, 2024 and sell it today you would earn a total of 2,740 from holding Eaton PLC or generate 7.95% 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. Babcock Wilcox Enterprises
Performance |
| Timeline |
| Eaton PLC |
| Babcock Wilcox Enter |
Eaton PLC and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Babcock Wilcox
The main advantage of trading using opposite Eaton PLC and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Babcock Wilcox 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 Babcock Wilcox will offset losses from the drop in Babcock Wilcox's long position.| Eaton PLC vs. China Automotive Systems | Eaton PLC vs. China Natural Resources | Eaton PLC vs. Sonida Senior Living | Eaton PLC vs. UTStarcom Holdings Corp |
| Babcock Wilcox vs. Enerpac Tool Group | Babcock Wilcox vs. Gorman Rupp | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Franklin Electric Co |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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