Correlation Between EatonPLC and Roper Technologies

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

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

Diversification Opportunities for EatonPLC and Roper Technologies

0.69

Correlation Coefficient

EatonPLC  Roper Technologies

Poor diversification

The 3 months correlation between EatonPLC and Roper is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of EatonPLC i.e., EatonPLC and Roper Technologies go up and down completely randomly.

Pair Corralation between EatonPLC and Roper Technologies

Assuming the 90 days horizon Eaton PLC is expected to generate 1.67 times more return on investment than Roper Technologies. However, EatonPLC is 1.67 times more volatile than Roper Technologies. It trades about 0.07 of its potential returns per unit of risk. Roper Technologies is currently generating about 0.04 per unit of risk. If you would invest  31,389  in Eaton PLC on October 23, 2024 and sell it today you would earn a total of  2,386  from holding Eaton PLC or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Eaton PLC  vs.  Roper Technologies

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.

Roper Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Roper Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EatonPLC and Roper Technologies

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

The idea behind Eaton PLC and Roper Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.