Correlation Between Eaton PLC and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Sandvik AB ADR, you can compare the effects of market volatilities on Eaton PLC and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Sandvik AB.
Diversification Opportunities for Eaton PLC and Sandvik AB
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eaton and Sandvik is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of Eaton PLC i.e., Eaton PLC and Sandvik AB go up and down completely randomly.
Pair Corralation between Eaton PLC and Sandvik AB
Considering the 90-day investment horizon Eaton PLC is expected to generate 1.05 times more return on investment than Sandvik AB. However, Eaton PLC is 1.05 times more volatile than Sandvik AB ADR. It trades about 0.23 of its potential returns per unit of risk. Sandvik AB ADR is currently generating about -0.19 per unit of risk. If you would invest 34,352 in Eaton PLC on August 26, 2024 and sell it today you would earn a total of 3,389 from holding Eaton PLC or generate 9.87% 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. Sandvik AB ADR
Performance |
| Timeline |
| Eaton PLC |
| Sandvik AB ADR |
Eaton PLC and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Sandvik AB
The main advantage of trading using opposite Eaton PLC and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Eaton PLC vs. Graco Inc | Eaton PLC vs. Franklin Electric Co | Eaton PLC vs. Flowserve | Eaton PLC vs. Donaldson |
| Sandvik AB vs. Rockwell Automation | Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. Fanuc | Sandvik AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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