Correlation Between Eaton PLC and Nel ASA
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Nel ASA 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 Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Nel ASA, you can compare the effects of market volatilities on Eaton PLC and Nel ASA 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 Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Nel ASA.
Diversification Opportunities for Eaton PLC and Nel ASA
Pay attention - limited upside
The 3 months correlation between Eaton and Nel is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Eaton PLC i.e., Eaton PLC and Nel ASA go up and down completely randomly.
Pair Corralation between Eaton PLC and Nel ASA
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.39 times more return on investment than Nel ASA. However, Eaton PLC is 2.58 times less risky than Nel ASA. It trades about 0.23 of its potential returns per unit of risk. Nel ASA is currently generating about -0.37 per unit of risk. If you would invest 34,454 in Eaton PLC on August 27, 2024 and sell it today you would earn a total of 3,287 from holding Eaton PLC or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Nel ASA
Performance |
| Timeline |
| Eaton PLC |
| Nel ASA |
Eaton PLC and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Nel ASA
The main advantage of trading using opposite Eaton PLC and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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