Correlation Between Recrusul and Eaton Plc
Can any of the company-specific risk be diversified away by investing in both Recrusul 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 Recrusul and Eaton Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Recrusul SA and Eaton plc, you can compare the effects of market volatilities on Recrusul 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 Recrusul with a short position of Eaton Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Recrusul and Eaton Plc.
Diversification Opportunities for Recrusul and Eaton Plc
Poor diversification
The 3 months correlation between Recrusul and Eaton is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Recrusul SA and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc and Recrusul 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 Recrusul SA 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 Recrusul i.e., Recrusul and Eaton Plc go up and down completely randomly.
Pair Corralation between Recrusul and Eaton Plc
Assuming the 90 days trading horizon Recrusul SA is expected to generate 2.51 times more return on investment than Eaton Plc. However, Recrusul is 2.51 times more volatile than Eaton plc. It trades about 0.15 of its potential returns per unit of risk. Eaton plc is currently generating about -0.12 per unit of risk. If you would invest 70.00 in Recrusul SA on November 29, 2024 and sell it today you would earn a total of 11.00 from holding Recrusul SA or generate 15.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Recrusul SA vs. Eaton plc
Performance |
| Timeline |
| Recrusul SA |
| Eaton plc |
Recrusul and Eaton Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Recrusul and Eaton Plc
The main advantage of trading using opposite Recrusul and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Recrusul 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.| Recrusul vs. Recrusul SA | Recrusul vs. Lupatech SA | Recrusul vs. Viver Incorporadora e | Recrusul vs. Triunfo Participaes e |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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