Correlation Between Eaton PLC and Hillenbrand
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Hillenbrand 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 Hillenbrand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Hillenbrand, you can compare the effects of market volatilities on Eaton PLC and Hillenbrand 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 Hillenbrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Hillenbrand.
Diversification Opportunities for Eaton PLC and Hillenbrand
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Eaton and Hillenbrand is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand 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 Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of Eaton PLC i.e., Eaton PLC and Hillenbrand go up and down completely randomly.
Pair Corralation between Eaton PLC and Hillenbrand
Considering the 90-day investment horizon Eaton PLC is expected to under-perform the Hillenbrand. In addition to that, Eaton PLC is 1.56 times more volatile than Hillenbrand. It trades about -0.09 of its total potential returns per unit of risk. Hillenbrand is currently generating about 0.04 per unit of volatility. If you would invest 3,108 in Hillenbrand on November 9, 2024 and sell it today you would earn a total of 39.00 from holding Hillenbrand or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Hillenbrand
Performance |
| Timeline |
| Eaton PLC |
| Hillenbrand |
Eaton PLC and Hillenbrand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Hillenbrand
The main advantage of trading using opposite Eaton PLC and Hillenbrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Hillenbrand 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 Hillenbrand will offset losses from the drop in Hillenbrand's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
| Hillenbrand vs. IDEX Corporation | Hillenbrand vs. Watts Water Technologies | Hillenbrand vs. Donaldson | Hillenbrand vs. Gorman Rupp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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