Correlation Between Chart Industries and Eaton PLC

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

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

Diversification Opportunities for Chart Industries and Eaton PLC

0.26

Correlation Coefficient

Chart Industries  Eaton PLC

Modest diversification

The 3 months correlation between Chart and Eaton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chart Industries and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Chart Industries 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 Chart Industries are associated (or correlated) with Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of Chart Industries i.e., Chart Industries and Eaton PLC go up and down completely randomly.

Pair Corralation between Chart Industries and Eaton PLC

Given the investment horizon of 90 days Chart Industries is expected to generate 1.04 times less return on investment than Eaton PLC. In addition to that, Chart Industries is 2.02 times more volatile than Eaton PLC. It trades about 0.05 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.1 per unit of volatility. If you would invest  15,607  in Eaton PLC on October 21, 2024 and sell it today you would earn a total of  19,021  from holding Eaton PLC or generate 121.87% return on investment over 90 days.

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

Chart Industries  vs.  Eaton PLC

Chart Industries

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chart Industries are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Chart Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Chart Industries and Eaton PLC

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

The idea behind Chart Industries and Eaton PLC 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.