Correlation Between Eaton PLC and Xinjiang Goldwind
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Xinjiang Goldwind 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 Xinjiang Goldwind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Xinjiang Goldwind Science, you can compare the effects of market volatilities on Eaton PLC and Xinjiang Goldwind 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 Xinjiang Goldwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Xinjiang Goldwind.
Diversification Opportunities for Eaton PLC and Xinjiang Goldwind
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eaton and Xinjiang is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Xinjiang Goldwind Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Goldwind Science 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 Xinjiang Goldwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Goldwind Science has no effect on the direction of Eaton PLC i.e., Eaton PLC and Xinjiang Goldwind go up and down completely randomly.
Pair Corralation between Eaton PLC and Xinjiang Goldwind
Considering the 90-day investment horizon Eaton PLC is expected to generate 0.85 times more return on investment than Xinjiang Goldwind. However, Eaton PLC is 1.18 times less risky than Xinjiang Goldwind. It trades about 0.2 of its potential returns per unit of risk. Xinjiang Goldwind Science is currently generating about -0.08 per unit of risk. If you would invest 34,185 in Eaton PLC on August 31, 2024 and sell it today you would earn a total of 3,013 from holding Eaton PLC or generate 8.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Xinjiang Goldwind Science
Performance |
| Timeline |
| Eaton PLC |
| Xinjiang Goldwind Science |
Eaton PLC and Xinjiang Goldwind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Xinjiang Goldwind
The main advantage of trading using opposite Eaton PLC and Xinjiang Goldwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Xinjiang Goldwind 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 Xinjiang Goldwind will offset losses from the drop in Xinjiang Goldwind's long position.| Eaton PLC vs. Illinois Tool Works | Eaton PLC vs. Dover | Eaton PLC vs. Cummins | Eaton PLC vs. Parker Hannifin |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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