Correlation Between Next Hydrogen and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Next Hydrogen 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 Next Hydrogen and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next Hydrogen Solutions and Eaton PLC, you can compare the effects of market volatilities on Next Hydrogen 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 Next Hydrogen with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Hydrogen and Eaton PLC.
Diversification Opportunities for Next Hydrogen and Eaton PLC
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Next and Eaton is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Next Hydrogen Solutions and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Next Hydrogen 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 Next Hydrogen Solutions 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 Next Hydrogen i.e., Next Hydrogen and Eaton PLC go up and down completely randomly.
Pair Corralation between Next Hydrogen and Eaton PLC
Assuming the 90 days horizon Next Hydrogen Solutions is expected to under-perform the Eaton PLC. In addition to that, Next Hydrogen is 5.36 times more volatile than Eaton PLC. It trades about -0.11 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.34 per unit of volatility. If you would invest 33,065 in Eaton PLC on September 1, 2024 and sell it today you would earn a total of 4,477 from holding Eaton PLC or generate 13.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Next Hydrogen Solutions vs. Eaton PLC
Performance |
| Timeline |
| Next Hydrogen Solutions |
| Eaton PLC |
Next Hydrogen and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Next Hydrogen and Eaton PLC
The main advantage of trading using opposite Next Hydrogen and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Hydrogen 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.| Next Hydrogen vs. Weir Group PLC | Next Hydrogen vs. Greenshift Corp | Next Hydrogen vs. Quality Industrial Corp | Next Hydrogen vs. ITM Power Plc |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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