Correlation Between Stewart Information and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Stewart Information 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 Stewart Information and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stewart Information Services and Eaton PLC, you can compare the effects of market volatilities on Stewart Information 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 Stewart Information with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stewart Information and Eaton PLC.
Diversification Opportunities for Stewart Information and Eaton PLC
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stewart and Eaton is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Stewart Information 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 Stewart Information Services 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 Stewart Information i.e., Stewart Information and Eaton PLC go up and down completely randomly.
Pair Corralation between Stewart Information and Eaton PLC
Assuming the 90 days horizon Stewart Information is expected to generate 1.86 times less return on investment than Eaton PLC. But when comparing it to its historical volatility, Stewart Information Services is 1.19 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 0.11 of returns per unit of risk over similar time horizon. If you would invest 21,361 in Eaton PLC on August 25, 2024 and sell it today you would earn a total of 13,259 from holding Eaton PLC or generate 62.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stewart Information Services vs. Eaton PLC
Performance |
| Timeline |
| Stewart Information |
| Eaton PLC |
Stewart Information and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stewart Information and Eaton PLC
The main advantage of trading using opposite Stewart Information and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stewart Information 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.| Stewart Information vs. Insurance Australia Group | Stewart Information vs. Superior Plus Corp | Stewart Information vs. NMI Holdings | Stewart Information vs. Origin Agritech |
| Eaton PLC vs. INFORMATION SVC GRP | Eaton PLC vs. SHELF DRILLING LTD | Eaton PLC vs. TERADATA | Eaton PLC vs. Stewart Information Services |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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