Correlation Between Sixt SE and EatonPLC

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

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

Diversification Opportunities for Sixt SE and EatonPLC

0.77

Correlation Coefficient

Sixt SE  EatonPLC

Poor diversification

The 3 months correlation between Sixt and EatonPLC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sixt SE and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Sixt SE 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 Sixt SE are associated (or correlated) with EatonPLC. 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 Sixt SE i.e., Sixt SE and EatonPLC go up and down completely randomly.

Pair Corralation between Sixt SE and EatonPLC

Assuming the 90 days trading horizon Sixt SE is expected to under-perform the EatonPLC. In addition to that, Sixt SE is 1.07 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 0.11 per unit of volatility. If you would invest  14,554  in Eaton PLC on August 31, 2024 and sell it today you would earn a total of  21,131  from holding Eaton PLC or generate 145.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Sixt SE  vs.  Eaton PLC

Sixt SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sixt SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sixt SE reported solid returns over the last few months and may actually be approaching a breakup point.

Eaton PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EatonPLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sixt SE and EatonPLC

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

The idea behind Sixt SE and Eaton PLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.