Correlation Between Eaton PLC and Siemens Energy
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Siemens Energy 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 Siemens Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Siemens Energy AG, you can compare the effects of market volatilities on Eaton PLC and Siemens Energy 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 Siemens Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Siemens Energy.
Diversification Opportunities for Eaton PLC and Siemens Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eaton and Siemens is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG 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 Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of Eaton PLC i.e., Eaton PLC and Siemens Energy go up and down completely randomly.
Pair Corralation between Eaton PLC and Siemens Energy
Considering the 90-day investment horizon Eaton PLC is expected to generate 1.13 times less return on investment than Siemens Energy. But when comparing it to its historical volatility, Eaton PLC is 2.12 times less risky than Siemens Energy. It trades about 0.13 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,419 in Siemens Energy AG on August 26, 2024 and sell it today you would earn a total of 2,535 from holding Siemens Energy AG or generate 104.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Siemens Energy AG
Performance |
| Timeline |
| Eaton PLC |
| Siemens Energy AG |
Eaton PLC and Siemens Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Siemens Energy
The main advantage of trading using opposite Eaton PLC and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Siemens Energy 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 Siemens Energy will offset losses from the drop in Siemens Energy's long position.| Eaton PLC vs. Graco Inc | Eaton PLC vs. Franklin Electric Co | Eaton PLC vs. Flowserve | Eaton PLC vs. Donaldson |
| Siemens Energy vs. Aumann AG | Siemens Energy vs. Arista Power | Siemens Energy vs. Atlas Copco AB | Siemens Energy vs. American Commerce Solutions |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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