Correlation Between Yokogawa Electric and Eaton PLC

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

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

Diversification Opportunities for Yokogawa Electric and Eaton PLC

-0.78

Correlation Coefficient

Yokogawa Electric  Eaton PLC

Pay attention - limited upside

The 3 months correlation between Yokogawa and Eaton is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Yokogawa Electric Corp and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Yokogawa Electric 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 Yokogawa Electric Corp 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 Yokogawa Electric i.e., Yokogawa Electric and Eaton PLC go up and down completely randomly.

Pair Corralation between Yokogawa Electric and Eaton PLC

Assuming the 90 days horizon Yokogawa Electric is expected to generate 2.46 times less return on investment than Eaton PLC. In addition to that, Yokogawa Electric is 1.4 times more volatile than Eaton PLC. It trades about 0.03 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.1 per unit of volatility. If you would invest  21,226  in Eaton PLC on September 12, 2024 and sell it today you would earn a total of  14,623  from holding Eaton PLC or generate 68.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

Yokogawa Electric Corp  vs.  Eaton PLC

Yokogawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yokogawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Eaton PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eaton PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yokogawa Electric and Eaton PLC

The main advantage of trading using opposite Yokogawa Electric and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yokogawa Electric 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.

The idea behind Yokogawa Electric Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.