Correlation Between Otis Worldwide and Eaton Plc
Can any of the company-specific risk be diversified away by investing in both Otis Worldwide 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 Otis Worldwide and Eaton Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Otis Worldwide and Eaton plc, you can compare the effects of market volatilities on Otis Worldwide 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 Otis Worldwide with a short position of Eaton Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otis Worldwide and Eaton Plc.
Diversification Opportunities for Otis Worldwide and Eaton Plc
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Otis and Eaton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Otis Worldwide and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc and Otis Worldwide 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 Otis Worldwide 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 Otis Worldwide i.e., Otis Worldwide and Eaton Plc go up and down completely randomly.
Pair Corralation between Otis Worldwide and Eaton Plc
Assuming the 90 days trading horizon Otis Worldwide is expected to generate 0.51 times more return on investment than Eaton Plc. However, Otis Worldwide is 1.94 times less risky than Eaton Plc. It trades about -0.07 of its potential returns per unit of risk. Eaton plc is currently generating about -0.07 per unit of risk. If you would invest 5,784 in Otis Worldwide on November 7, 2024 and sell it today you would lose (314.00) from holding Otis Worldwide or give up 5.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.55% |
| Values | Daily Returns |
Otis Worldwide vs. Eaton plc
Performance |
| Timeline |
| Otis Worldwide |
| Eaton plc |
Otis Worldwide and Eaton Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Otis Worldwide and Eaton Plc
The main advantage of trading using opposite Otis Worldwide and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otis Worldwide 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.| Otis Worldwide vs. Honeywell International | Otis Worldwide vs. General Electric | Otis Worldwide vs. Roper Technologies, | Otis Worldwide vs. Aeris Indstria e |
| Eaton Plc vs. Honeywell International | Eaton Plc vs. General Electric | Eaton Plc vs. Roper Technologies, | Eaton Plc vs. Otis Worldwide |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Commodity Directory Find actively traded commodities issued by global exchanges |