Correlation Between Eaton PLC and CVD Equipment
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and CVD Equipment 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 CVD Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and CVD Equipment, you can compare the effects of market volatilities on Eaton PLC and CVD Equipment 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 CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and CVD Equipment.
Diversification Opportunities for Eaton PLC and CVD Equipment
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Eaton and CVD is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Eaton PLC i.e., Eaton PLC and CVD Equipment go up and down completely randomly.
Pair Corralation between Eaton PLC and CVD Equipment
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.43 times more return on investment than CVD Equipment. However, Eaton PLC is 2.3 times less risky than CVD Equipment. It trades about 0.22 of its potential returns per unit of risk. CVD Equipment is currently generating about 0.0 per unit of risk. If you would invest 34,454 in Eaton PLC on August 28, 2024 and sell it today you would earn a total of 3,214 from holding Eaton PLC or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. CVD Equipment
Performance |
| Timeline |
| Eaton PLC |
| CVD Equipment |
Eaton PLC and CVD Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and CVD Equipment
The main advantage of trading using opposite Eaton PLC and CVD Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, CVD Equipment 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 CVD Equipment will offset losses from the drop in CVD Equipment's long position.| Eaton PLC vs. Graco Inc | Eaton PLC vs. Franklin Electric Co | Eaton PLC vs. Flowserve | Eaton PLC vs. Donaldson |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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