Correlation Between Eaton PLC and Natures Miracle

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

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

Diversification Opportunities for Eaton PLC and Natures Miracle

-0.41

Correlation Coefficient

Eaton PLC  Natures Miracle

Very good diversification

The 3 months correlation between Eaton and Natures is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Natures Miracle Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Miracle Holding 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 Natures Miracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Miracle Holding has no effect on the direction of Eaton PLC i.e., Eaton PLC and Natures Miracle go up and down completely randomly.

Pair Corralation between Eaton PLC and Natures Miracle

Considering the 90-day investment horizon Eaton PLC is expected to generate 18.65 times less return on investment than Natures Miracle. But when comparing it to its historical volatility, Eaton PLC is 18.69 times less risky than Natures Miracle. It trades about 0.11 of its potential returns per unit of risk. Natures Miracle Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4.92  in Natures Miracle Holding on October 11, 2024 and sell it today you would lose (3.34) from holding Natures Miracle Holding or give up 67.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.26%
Values	Daily Returns

Eaton PLC  vs.  Natures Miracle Holding

Eaton PLC

Risk-Adjusted Performance

1 of 100

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.

Natures Miracle Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Miracle Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Natures Miracle showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eaton PLC and Natures Miracle

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

The idea behind Eaton PLC and Natures Miracle Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.