Correlation Between Rockwell Automation and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Rockwell Automation 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 Rockwell Automation and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rockwell Automation and Eaton PLC, you can compare the effects of market volatilities on Rockwell Automation 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 Rockwell Automation with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rockwell Automation and Eaton PLC.
Diversification Opportunities for Rockwell Automation and Eaton PLC
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rockwell and Eaton is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Automation and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Rockwell Automation 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 Rockwell Automation 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 Rockwell Automation i.e., Rockwell Automation and Eaton PLC go up and down completely randomly.
Pair Corralation between Rockwell Automation and Eaton PLC
Considering the 90-day investment horizon Rockwell Automation is expected to generate 13.63 times less return on investment than Eaton PLC. In addition to that, Rockwell Automation is 1.04 times more volatile than Eaton PLC. It trades about 0.01 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.18 per unit of volatility. If you would invest 29,875 in Eaton PLC on January 18, 2024 and sell it today you would earn a total of 1,660 from holding Eaton PLC or generate 5.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Rockwell Automation vs. Eaton PLC
Performance |
Timeline |
Rockwell Automation |
Eaton PLC |
Rockwell Automation and Eaton PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rockwell Automation and Eaton PLC
The main advantage of trading using opposite Rockwell Automation and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwell Automation 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.Rockwell Automation vs. Illinois Tool Works | Rockwell Automation vs. Dover | Rockwell Automation vs. Cummins | Rockwell Automation vs. Parker Hannifin |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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