Correlation Between Eaton PLC and Schindler Holding

Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Schindler Holding 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 Eaton PLC and Schindler Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eaton PLC and Schindler Holding AG, you can compare the effects of market volatilities on Eaton PLC and Schindler Holding 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 Eaton PLC with a short position of Schindler Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Schindler Holding.

Diversification Opportunities for Eaton PLC and Schindler Holding

0.68

Correlation Coefficient

Eaton PLC  Schindler Holding

Poor diversification

The 3 months correlation between Eaton and Schindler is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Schindler Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schindler Holding and Eaton PLC 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 Eaton PLC are associated (or correlated) with Schindler Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schindler Holding has no effect on the direction of Eaton PLC i.e., Eaton PLC and Schindler Holding go up and down completely randomly.

Pair Corralation between Eaton PLC and Schindler Holding

Considering the 90-day investment horizon Eaton PLC is expected to generate 2.49 times more return on investment than Schindler Holding. However, Eaton PLC is 2.49 times more volatile than Schindler Holding AG. It trades about 0.04 of its potential returns per unit of risk. Schindler Holding AG is currently generating about 0.04 per unit of risk. If you would invest  32,647  in Eaton PLC on September 24, 2024 and sell it today you would earn a total of  1,165  from holding Eaton PLC or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Eaton PLC  vs.  Schindler Holding AG

Eaton PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Eaton PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Schindler Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schindler Holding AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schindler Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eaton PLC and Schindler Holding

The main advantage of trading using opposite Eaton PLC and Schindler Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Schindler Holding 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 Schindler Holding will offset losses from the drop in Schindler Holding's long position.

The idea behind Eaton PLC and Schindler Holding AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..