Correlation Between Eaton PLC and Dover

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

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

Diversification Opportunities for Eaton PLC and Dover

0.2

Correlation Coefficient

Eaton PLC  Dover

Modest diversification

The 3 months correlation between Eaton and Dover is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover 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 Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of Eaton PLC i.e., Eaton PLC and Dover go up and down completely randomly.

Pair Corralation between Eaton PLC and Dover

Considering the 90-day investment horizon Eaton PLC is expected to under-perform the Dover. In addition to that, Eaton PLC is 1.77 times more volatile than Dover. It trades about -0.08 of its total potential returns per unit of risk. Dover is currently generating about -0.04 per unit of volatility. If you would invest  18,783  in Dover on December 27, 2024 and sell it today you would lose (870.00) from holding Dover or give up 4.63% of portfolio value over 90 days.

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

Eaton PLC  vs.  Dover

Eaton PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eaton PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dover

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dover has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dover is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eaton PLC and Dover

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

The idea behind Eaton PLC and Dover 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.