Correlation Between Eaton PLC and Nidec
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Nidec 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 Nidec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Nidec, you can compare the effects of market volatilities on Eaton PLC and Nidec 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 Nidec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Nidec.
Diversification Opportunities for Eaton PLC and Nidec
Good diversification
The 3 months correlation between Eaton and Nidec is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Eaton PLC i.e., Eaton PLC and Nidec go up and down completely randomly.
Pair Corralation between Eaton PLC and Nidec
Considering the 90-day investment horizon Eaton PLC is expected to under-perform the Nidec. But the stock apears to be less risky and, when comparing its historical volatility, Eaton PLC is 2.34 times less risky than Nidec. The stock trades about -0.09 of its potential returns per unit of risk. The Nidec is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,701 in Nidec on October 20, 2024 and sell it today you would earn a total of 153.00 from holding Nidec or generate 8.99% 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. Nidec
Performance |
| Timeline |
| Eaton PLC |
| Nidec |
Eaton PLC and Nidec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Nidec
The main advantage of trading using opposite Eaton PLC and Nidec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Nidec 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 Nidec will offset losses from the drop in Nidec's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
| Nidec vs. Daifuku Co | Nidec vs. Eaton PLC | Nidec vs. Yokogawa Electric Corp | Nidec vs. Vestas Wind Systems |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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