Correlation Between Eaton Plc and Inepar SA

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Can any of the company-specific risk be diversified away by investing in both Eaton Plc and Inepar SA 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 Inepar SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton plc and Inepar SA Indstria, you can compare the effects of market volatilities on Eaton Plc and Inepar SA 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 Inepar SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Plc and Inepar SA.

Diversification Opportunities for Eaton Plc and Inepar SA

EatonIneparDiversified AwayEatonIneparDiversified Away100%
-0.92
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Eaton and Inepar is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Eaton plc and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria 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 Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of Eaton Plc i.e., Eaton Plc and Inepar SA go up and down completely randomly.

Pair Corralation between Eaton Plc and Inepar SA

Assuming the 90 days trading horizon Eaton plc is expected to generate 0.52 times more return on investment than Inepar SA. However, Eaton plc is 1.91 times less risky than Inepar SA. It trades about 0.15 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about -0.07 per unit of risk. If you would invest  7,766  in Eaton plc on September 15, 2024 and sell it today you would earn a total of  7,609  from holding Eaton plc or generate 97.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy99.63%
ValuesDaily Returns

Eaton plc  vs.  Inepar SA Indstria

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -30-20-100102030
JavaScript chart by amCharts 3.21.15E1TN34 INEP4
       Timeline  
Eaton plc 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Eaton plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Eaton Plc sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec125130135140145150155160165
Inepar SA Indstria 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Inepar SA Indstria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1.21.31.41.51.61.71.81.92

Eaton Plc and Inepar SA Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.09-3.81-2.53-1.260.0241.442.884.315.75 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15E1TN34 INEP4
       Returns  

Pair Trading with Eaton Plc and Inepar SA

The main advantage of trading using opposite Eaton Plc and Inepar SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Plc position performs unexpectedly, Inepar SA 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 Inepar SA will offset losses from the drop in Inepar SA's long position.
The idea behind Eaton plc and Inepar SA Indstria 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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