Correlation Between Visa and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Eaton PLC, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Eaton PLC.
Diversification Opportunities for Visa and Eaton PLC
Very good diversification
The 3 months correlation between Visa and Eaton is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Visa 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 Visa Class A 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 Visa i.e., Visa and Eaton PLC go up and down completely randomly.
Pair Corralation between Visa and Eaton PLC
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.24 times more return on investment than Eaton PLC. However, Visa Class A is 4.11 times less risky than Eaton PLC. It trades about 0.56 of its potential returns per unit of risk. Eaton PLC is currently generating about -0.09 per unit of risk. If you would invest 31,260 in Visa Class A on November 9, 2024 and sell it today you would earn a total of 3,488 from holding Visa Class A or generate 11.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Eaton PLC
Performance |
| Timeline |
| Visa Class A |
| Eaton PLC |
Visa and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Eaton PLC
The main advantage of trading using opposite Visa and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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