Correlation Between Spire Global and EatonPLC
Can any of the company-specific risk be diversified away by investing in both Spire Global and EatonPLC 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 Spire Global and EatonPLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spire Global and Eaton PLC, you can compare the effects of market volatilities on Spire Global and EatonPLC 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 Spire Global with a short position of EatonPLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and EatonPLC.
Diversification Opportunities for Spire Global and EatonPLC
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spire and EatonPLC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Spire Global 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 Spire Global are associated (or correlated) with EatonPLC. 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 Spire Global i.e., Spire Global and EatonPLC go up and down completely randomly.
Pair Corralation between Spire Global and EatonPLC
Given the investment horizon of 90 days Spire Global is expected to generate 3.1 times more return on investment than EatonPLC. However, Spire Global is 3.1 times more volatile than Eaton PLC. It trades about 0.05 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.11 per unit of risk. If you would invest 864.00 in Spire Global on September 7, 2024 and sell it today you would earn a total of 581.00 from holding Spire Global or generate 67.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.02% |
Values | Daily Returns |
Spire Global vs. Eaton PLC
Performance |
Timeline |
Spire Global |
Eaton PLC |
Spire Global and EatonPLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spire Global and EatonPLC
The main advantage of trading using opposite Spire Global and EatonPLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire Global position performs unexpectedly, EatonPLC 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 EatonPLC will offset losses from the drop in EatonPLC's long position.Spire Global vs. Lichen China Limited | Spire Global vs. Unifirst | Spire Global vs. First Advantage Corp | Spire Global vs. Performant Financial |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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