Correlation Between Eaton PLC and Mitsubishi Heavy
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Mitsubishi Heavy 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 Mitsubishi Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Mitsubishi Heavy Industries, you can compare the effects of market volatilities on Eaton PLC and Mitsubishi Heavy 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 Mitsubishi Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Mitsubishi Heavy.
Diversification Opportunities for Eaton PLC and Mitsubishi Heavy
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eaton and Mitsubishi is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind 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 Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of Eaton PLC i.e., Eaton PLC and Mitsubishi Heavy go up and down completely randomly.
Pair Corralation between Eaton PLC and Mitsubishi Heavy
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.44 times more return on investment than Mitsubishi Heavy. However, Eaton PLC is 2.29 times less risky than Mitsubishi Heavy. It trades about -0.2 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about -0.09 per unit of risk. If you would invest 31,155 in Eaton PLC on November 28, 2024 and sell it today you would lose (2,170) from holding Eaton PLC or give up 6.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Mitsubishi Heavy Industries
Performance |
| Timeline |
| Eaton PLC |
| Mitsubishi Heavy Ind |
Eaton PLC and Mitsubishi Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Mitsubishi Heavy
The main advantage of trading using opposite Eaton PLC and Mitsubishi Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Mitsubishi Heavy 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 Mitsubishi Heavy will offset losses from the drop in Mitsubishi Heavy's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
| Mitsubishi Heavy vs. Kawasaki Heavy Industries | Mitsubishi Heavy vs. Mitsubishi Electric Corp | Mitsubishi Heavy vs. Mitsubishi Corp | Mitsubishi Heavy vs. Marubeni Corp ADR |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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