Correlation Between Eaton PLC and Nordex SE

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

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

Diversification Opportunities for Eaton PLC and Nordex SE

-0.58

Correlation Coefficient

Eaton PLC  Nordex SE

Excellent diversification

The 3 months correlation between Eaton and Nordex is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Nordex SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordex SE 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 Nordex SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordex SE has no effect on the direction of Eaton PLC i.e., Eaton PLC and Nordex SE go up and down completely randomly.

Pair Corralation between Eaton PLC and Nordex SE

Considering the 90-day investment horizon Eaton PLC is expected to under-perform the Nordex SE. But the stock apears to be less risky and, when comparing its historical volatility, Eaton PLC is 1.41 times less risky than Nordex SE. The stock trades about -0.07 of its potential returns per unit of risk. The Nordex SE is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Nordex SE on December 28, 2024 and sell it today you would earn a total of  577.00  from holding Nordex SE or generate 49.74% return on investment over 90 days.

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

Eaton PLC  vs.  Nordex SE

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.

Nordex SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nordex SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nordex SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eaton PLC and Nordex SE

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

The idea behind Eaton PLC and Nordex SE 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.