Correlation Between Nordson and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Nordson 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 Nordson and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordson and Eaton PLC, you can compare the effects of market volatilities on Nordson 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 Nordson with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordson and Eaton PLC.
Diversification Opportunities for Nordson and Eaton PLC
Weak diversification
The 3 months correlation between Nordson and Eaton is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nordson and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Nordson 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 Nordson 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 Nordson i.e., Nordson and Eaton PLC go up and down completely randomly.
Pair Corralation between Nordson and Eaton PLC
Given the investment horizon of 90 days Nordson is expected to generate 1.74 times less return on investment than Eaton PLC. But when comparing it to its historical volatility, Nordson is 1.39 times less risky than Eaton PLC. It trades about 0.18 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 34,454 in Eaton PLC on August 28, 2024 and sell it today you would earn a total of 3,214 from holding Eaton PLC or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordson vs. Eaton PLC
Performance |
| Timeline |
| Nordson |
| Eaton PLC |
Nordson and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordson and Eaton PLC
The main advantage of trading using opposite Nordson and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordson 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.| Nordson vs. Aquagold International | Nordson vs. Morningstar Unconstrained Allocation | Nordson vs. High Yield Municipal Fund | Nordson vs. Thrivent High Yield |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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