Correlation Between Brpr Corporate and Eaton Plc

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

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

Diversification Opportunities for Brpr Corporate and Eaton Plc

-0.19

Correlation Coefficient

Brpr Corporate  Eaton Plc

Good diversification

The 3 months correlation between Brpr and Eaton is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Brpr Corporate Offices and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc and Brpr Corporate 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 Brpr Corporate Offices 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 Brpr Corporate i.e., Brpr Corporate and Eaton Plc go up and down completely randomly.

Pair Corralation between Brpr Corporate and Eaton Plc

Assuming the 90 days trading horizon Brpr Corporate is expected to generate 21.76 times less return on investment than Eaton Plc. But when comparing it to its historical volatility, Brpr Corporate Offices is 1.14 times less risky than Eaton Plc. It trades about 0.01 of its potential returns per unit of risk. Eaton plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,332  in Eaton plc on October 10, 2024 and sell it today you would earn a total of  1,535  from holding Eaton plc or generate 11.51% return on investment over 90 days.

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

Brpr Corporate Offices  vs.  Eaton plc

Brpr Corporate Offices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brpr Corporate Offices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brpr Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eaton Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brpr Corporate and Eaton Plc

The main advantage of trading using opposite Brpr Corporate and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brpr Corporate 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 Brpr Corporate Offices 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.