Correlation Between Eaton PLC and Morgan Advanced
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Morgan Advanced 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 Morgan Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Morgan Advanced Materials, you can compare the effects of market volatilities on Eaton PLC and Morgan Advanced 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 Morgan Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Morgan Advanced.
Diversification Opportunities for Eaton PLC and Morgan Advanced
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and Morgan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Eaton PLC i.e., Eaton PLC and Morgan Advanced go up and down completely randomly.
Pair Corralation between Eaton PLC and Morgan Advanced
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.6 times more return on investment than Morgan Advanced. However, Eaton PLC is 1.67 times less risky than Morgan Advanced. It trades about 0.1 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about 0.04 per unit of risk. If you would invest 15,418 in Eaton PLC on October 14, 2024 and sell it today you would earn a total of 18,727 from holding Eaton PLC or generate 121.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Morgan Advanced Materials
Performance |
| Timeline |
| Eaton PLC |
| Morgan Advanced Materials |
Eaton PLC and Morgan Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Morgan Advanced
The main advantage of trading using opposite Eaton PLC and Morgan Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Morgan Advanced 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 Morgan Advanced will offset losses from the drop in Morgan Advanced's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
| Morgan Advanced vs. Parker Hannifin | Morgan Advanced vs. Eaton PLC | Morgan Advanced vs. Dover | Morgan Advanced vs. Illinois Tool Works |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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