Correlation Between Eaton PLC and Nordson

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

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

Diversification Opportunities for Eaton PLC and Nordson

0.44

Correlation Coefficient

Eaton PLC  Nordson

Very weak diversification

The 3 months correlation between Eaton and Nordson is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson 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 Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Eaton PLC i.e., Eaton PLC and Nordson go up and down completely randomly.

Pair Corralation between Eaton PLC and Nordson

Considering the 90-day investment horizon Eaton PLC is expected to generate 0.64 times more return on investment than Nordson. However, Eaton PLC is 1.55 times less risky than Nordson. It trades about -0.28 of its potential returns per unit of risk. Nordson is currently generating about -0.45 per unit of risk. If you would invest  37,105  in Eaton PLC on October 6, 2024 and sell it today you would lose (2,847) from holding Eaton PLC or give up 7.67% of portfolio value over 90 days.

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

Eaton PLC  vs.  Nordson

Eaton PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton PLC are ranked lower than 2 (%) 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.

Nordson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordson 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eaton PLC and Nordson

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

The idea behind Eaton PLC and Nordson 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.