Correlation Between Eaton PLC and Rotork Plc
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Rotork Plc 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 Rotork Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Rotork plc, you can compare the effects of market volatilities on Eaton PLC and Rotork Plc 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 Rotork Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Rotork Plc.
Diversification Opportunities for Eaton PLC and Rotork Plc
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eaton and Rotork is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Rotork plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotork plc 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 Rotork Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotork plc has no effect on the direction of Eaton PLC i.e., Eaton PLC and Rotork Plc go up and down completely randomly.
Pair Corralation between Eaton PLC and Rotork Plc
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.45 times more return on investment than Rotork Plc. However, Eaton PLC is 2.22 times less risky than Rotork Plc. It trades about 0.11 of its potential returns per unit of risk. Rotork plc is currently generating about 0.02 per unit of risk. If you would invest 15,655 in Eaton PLC on September 4, 2024 and sell it today you would earn a total of 21,567 from holding Eaton PLC or generate 137.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 79.19% |
| Values | Daily Returns |
Eaton PLC vs. Rotork plc
Performance |
| Timeline |
| Eaton PLC |
| Rotork plc |
Eaton PLC and Rotork Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Rotork Plc
The main advantage of trading using opposite Eaton PLC and Rotork Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Rotork Plc 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 Rotork Plc will offset losses from the drop in Rotork Plc's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
| Rotork Plc vs. Dear Cashmere Holding | Rotork Plc vs. Goff Corp | Rotork Plc vs. Wialan Technologies | Rotork Plc vs. Cgrowth Capital |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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