Correlation Between Eaton PLC and Haleon PLC

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

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

Diversification Opportunities for Eaton PLC and Haleon PLC

-0.5

Correlation Coefficient

Eaton PLC  Haleon PLC

Very good diversification

The 3 months correlation between Eaton and Haleon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Haleon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon PLC 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 Haleon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon PLC has no effect on the direction of Eaton PLC i.e., Eaton PLC and Haleon PLC go up and down completely randomly.

Pair Corralation between Eaton PLC and Haleon PLC

Assuming the 90 days horizon Eaton PLC is expected to generate 2.1 times less return on investment than Haleon PLC. In addition to that, Eaton PLC is 1.49 times more volatile than Haleon PLC. It trades about 0.02 of its total potential returns per unit of risk. Haleon PLC is currently generating about 0.07 per unit of volatility. If you would invest  875.00  in Haleon PLC on September 26, 2024 and sell it today you would earn a total of  35.00  from holding Haleon PLC or generate 4.0% return on investment over 90 days.

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

Eaton PLC  vs.  Haleon PLC

Eaton PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eaton PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Haleon PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Haleon PLC 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 Haleon PLC

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

The idea behind Eaton PLC and Haleon 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.