Correlation Between KONE Oyj and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both KONE Oyj and Eaton 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 KONE Oyj and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KONE Oyj and Eaton PLC, you can compare the effects of market volatilities on KONE Oyj and Eaton 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 KONE Oyj with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KONE Oyj and Eaton PLC.
Diversification Opportunities for KONE Oyj and Eaton PLC
Very weak diversification
The 3 months correlation between KONE and Eaton is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KONE Oyj and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and KONE Oyj 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 KONE Oyj are associated (or correlated) with Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of KONE Oyj i.e., KONE Oyj and Eaton PLC go up and down completely randomly.
Pair Corralation between KONE Oyj and Eaton PLC
Assuming the 90 days horizon KONE Oyj is expected to under-perform the Eaton PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, KONE Oyj is 1.29 times less risky than Eaton PLC. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Eaton PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 33,080 in Eaton PLC on August 29, 2024 and sell it today you would earn a total of 4,118 from holding Eaton PLC or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KONE Oyj vs. Eaton PLC
Performance |
| Timeline |
| KONE Oyj |
| Eaton PLC |
KONE Oyj and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KONE Oyj and Eaton PLC
The main advantage of trading using opposite KONE Oyj and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KONE Oyj position performs unexpectedly, Eaton 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.| KONE Oyj vs. Spirax Sarco Engineering PLC | KONE Oyj vs. Atlas Copco ADR | KONE Oyj vs. Vestas Wind Systems | KONE Oyj vs. IDEX Corporation |
| Eaton PLC vs. China Automotive Systems | Eaton PLC vs. China Natural Resources | Eaton PLC vs. Sonida Senior Living | Eaton PLC vs. UTStarcom Holdings Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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