Correlation Between Eaton PLC and Richtech Robotics

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

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

Diversification Opportunities for Eaton PLC and Richtech Robotics

-0.45

Correlation Coefficient

Eaton PLC  Richtech Robotics

Very good diversification

The 3 months correlation between Eaton and Richtech is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Richtech Robotics Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richtech Robotics Class 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 Richtech Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richtech Robotics Class has no effect on the direction of Eaton PLC i.e., Eaton PLC and Richtech Robotics go up and down completely randomly.

Pair Corralation between Eaton PLC and Richtech Robotics

Considering the 90-day investment horizon Eaton PLC is expected to generate 282.55 times less return on investment than Richtech Robotics. But when comparing it to its historical volatility, Eaton PLC is 10.34 times less risky than Richtech Robotics. It trades about 0.01 of its potential returns per unit of risk. Richtech Robotics Class is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  72.00  in Richtech Robotics Class on October 20, 2024 and sell it today you would earn a total of  238.00  from holding Richtech Robotics Class or generate 330.56% 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.  Richtech Robotics Class

Eaton PLC

Risk-Adjusted Performance

0 of 100

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 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.

Richtech Robotics Class

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Richtech Robotics Class are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Richtech Robotics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eaton PLC and Richtech Robotics

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

The idea behind Eaton PLC and Richtech Robotics Class 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.