Correlation Between Eaton PLC and Graco

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

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

Diversification Opportunities for Eaton PLC and Graco

-0.26

Correlation Coefficient

Eaton PLC  Graco

Very good diversification

The 3 months correlation between Eaton and Graco is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc 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 Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of Eaton PLC i.e., Eaton PLC and Graco go up and down completely randomly.

Pair Corralation between Eaton PLC and Graco

Considering the 90-day investment horizon Eaton PLC is expected to under-perform the Graco. In addition to that, Eaton PLC is 2.4 times more volatile than Graco Inc. It trades about -0.08 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.02 per unit of volatility. If you would invest  8,387  in Graco Inc on December 27, 2024 and sell it today you would earn a total of  57.00  from holding Graco Inc or generate 0.68% return on investment over 90 days.

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

Eaton PLC  vs.  Graco Inc

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.

Graco Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Graco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eaton PLC and Graco

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

The idea behind Eaton PLC and Graco Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.