Correlation Between EatonPLC and REDSUN PROPERTIES

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

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

Diversification Opportunities for EatonPLC and REDSUN PROPERTIES

-0.25

Correlation Coefficient

EatonPLC  REDSUN PROPERTIES

Very good diversification

The 3 months correlation between EatonPLC and REDSUN is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and REDSUN PROPERTIES GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDSUN PROPERTIES and EatonPLC 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 REDSUN PROPERTIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDSUN PROPERTIES has no effect on the direction of EatonPLC i.e., EatonPLC and REDSUN PROPERTIES go up and down completely randomly.

Pair Corralation between EatonPLC and REDSUN PROPERTIES

Assuming the 90 days horizon Eaton PLC is expected to generate 0.12 times more return on investment than REDSUN PROPERTIES. However, Eaton PLC is 8.48 times less risky than REDSUN PROPERTIES. It trades about 0.05 of its potential returns per unit of risk. REDSUN PROPERTIES GROUP is currently generating about -0.02 per unit of risk. If you would invest  31,398  in Eaton PLC on October 12, 2024 and sell it today you would earn a total of  1,692  from holding Eaton PLC or generate 5.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Eaton PLC  vs.  REDSUN PROPERTIES GROUP

Eaton PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EatonPLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

REDSUN PROPERTIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REDSUN PROPERTIES GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EatonPLC and REDSUN PROPERTIES

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

The idea behind Eaton PLC and REDSUN PROPERTIES GROUP 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.