Correlation Between Eaton PLC and Morgan Advanced

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

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

Diversification Opportunities for Eaton PLC and Morgan Advanced

0.08

Correlation Coefficient

Eaton PLC  Morgan Advanced

Significant diversification

The 3 months correlation between Eaton and Morgan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Eaton PLC i.e., Eaton PLC and Morgan Advanced go up and down completely randomly.

Pair Corralation between Eaton PLC and Morgan Advanced

Considering the 90-day investment horizon Eaton PLC is expected to generate 1.49 times more return on investment than Morgan Advanced. However, Eaton PLC is 1.49 times more volatile than Morgan Advanced Materials. It trades about 0.13 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.34 per unit of risk. If you would invest  33,771  in Eaton PLC on October 22, 2024 and sell it today you would earn a total of  857.00  from holding Eaton PLC or generate 2.54% return on investment over 90 days.

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

Eaton PLC  vs.  Morgan Advanced Materials

Eaton PLC

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Eaton PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Morgan Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eaton PLC and Morgan Advanced

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

The idea behind Eaton PLC and Morgan Advanced Materials 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.