Correlation Between Marvell Technology and Eaton Plc

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

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

Diversification Opportunities for Marvell Technology and Eaton Plc

0.52

Correlation Coefficient

Marvell Technology  Eaton Plc

Very weak diversification

The 3 months correlation between Marvell and Eaton is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology and Eaton plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton plc and Marvell Technology 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 Marvell Technology 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 Marvell Technology i.e., Marvell Technology and Eaton Plc go up and down completely randomly.

Pair Corralation between Marvell Technology and Eaton Plc

Assuming the 90 days trading horizon Marvell Technology is expected to generate 1.58 times more return on investment than Eaton Plc. However, Marvell Technology is 1.58 times more volatile than Eaton plc. It trades about 0.27 of its potential returns per unit of risk. Eaton plc is currently generating about 0.06 per unit of risk. If you would invest  6,797  in Marvell Technology on October 21, 2024 and sell it today you would earn a total of  803.00  from holding Marvell Technology or generate 11.81% return on investment over 90 days.

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

Marvell Technology  vs.  Eaton plc

Marvell Technology

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marvell Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Eaton plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eaton Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Marvell Technology and Eaton Plc

The main advantage of trading using opposite Marvell Technology and Eaton Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marvell Technology 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 Marvell Technology 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.