Correlation Between Vestas Wind and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Vestas Wind 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 Vestas Wind and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Eaton PLC, you can compare the effects of market volatilities on Vestas Wind 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 Vestas Wind with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Eaton PLC.
Diversification Opportunities for Vestas Wind and Eaton PLC
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vestas and Eaton is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and Eaton PLC go up and down completely randomly.
Pair Corralation between Vestas Wind and Eaton PLC
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Eaton PLC. In addition to that, Vestas Wind is 1.49 times more volatile than Eaton PLC. It trades about -0.05 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.14 per unit of volatility. If you would invest 20,456 in Eaton PLC on August 26, 2024 and sell it today you would earn a total of 17,285 from holding Eaton PLC or generate 84.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vestas Wind Systems vs. Eaton PLC
Performance |
| Timeline |
| Vestas Wind Systems |
| Eaton PLC |
Vestas Wind and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Eaton PLC
The main advantage of trading using opposite Vestas Wind and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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.| Vestas Wind vs. Aumann AG | Vestas Wind vs. Arista Power | Vestas Wind vs. Atlas Copco AB | Vestas Wind vs. American Commerce Solutions |
| Eaton PLC vs. Graco Inc | Eaton PLC vs. Franklin Electric Co | Eaton PLC vs. Flowserve | Eaton PLC vs. Donaldson |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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