Correlation Between ABB and Schneider Electric
Can any of the company-specific risk be diversified away by investing in both ABB and Schneider Electric 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 ABB and Schneider Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and Schneider Electric SE, you can compare the effects of market volatilities on ABB and Schneider Electric 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 ABB with a short position of Schneider Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Schneider Electric.
Diversification Opportunities for ABB and Schneider Electric
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABB and Schneider is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and ABB 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 ABB are associated (or correlated) with Schneider Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider Electric has no effect on the direction of ABB i.e., ABB and Schneider Electric go up and down completely randomly.
Pair Corralation between ABB and Schneider Electric
Assuming the 90 days trading horizon ABB is expected to generate 1.33 times less return on investment than Schneider Electric. In addition to that, ABB is 1.43 times more volatile than Schneider Electric SE. It trades about 0.03 of its total potential returns per unit of risk. Schneider Electric SE is currently generating about 0.05 per unit of volatility. If you would invest 22,305 in Schneider Electric SE on September 13, 2024 and sell it today you would earn a total of 1,985 from holding Schneider Electric SE or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB vs. Schneider Electric SE
Performance |
| Timeline |
| ABB |
| Schneider Electric |
ABB and Schneider Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and Schneider Electric
The main advantage of trading using opposite ABB and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB position performs unexpectedly, Schneider Electric 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 Schneider Electric will offset losses from the drop in Schneider Electric's long position.| ABB vs. BII Railway Transportation | ABB vs. Cogent Communications Holdings | ABB vs. Transportadora de Gas | ABB vs. Entravision Communications |
| Schneider Electric vs. SALESFORCE INC CDR | Schneider Electric vs. CARSALESCOM | Schneider Electric vs. Sims Metal Management | Schneider Electric vs. Tradeweb Markets |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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