Correlation Between EatonPLC and CanSino Biologics

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

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

Diversification Opportunities for EatonPLC and CanSino Biologics

0.49

Correlation Coefficient

EatonPLC  CanSino Biologics

Very weak diversification

The 3 months correlation between EatonPLC and CanSino is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics 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 CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of EatonPLC i.e., EatonPLC and CanSino Biologics go up and down completely randomly.

Pair Corralation between EatonPLC and CanSino Biologics

Assuming the 90 days horizon Eaton PLC is expected to generate 0.44 times more return on investment than CanSino Biologics. However, Eaton PLC is 2.28 times less risky than CanSino Biologics. It trades about -0.01 of its potential returns per unit of risk. CanSino Biologics is currently generating about -0.21 per unit of risk. If you would invest  33,705  in Eaton PLC on October 15, 2024 and sell it today you would lose (125.00) from holding Eaton PLC or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Eaton PLC  vs.  CanSino Biologics

Eaton PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EatonPLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CanSino Biologics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CanSino Biologics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CanSino Biologics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EatonPLC and CanSino Biologics

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

The idea behind Eaton PLC and CanSino Biologics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.