Correlation Between Legrand SA and Powell Industries
Can any of the company-specific risk be diversified away by investing in both Legrand SA and Powell Industries 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 Legrand SA and Powell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legrand SA ADR and Powell Industries, you can compare the effects of market volatilities on Legrand SA and Powell Industries 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 Legrand SA with a short position of Powell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legrand SA and Powell Industries.
Diversification Opportunities for Legrand SA and Powell Industries
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legrand and Powell is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR and Powell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powell Industries and Legrand SA 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 Legrand SA ADR are associated (or correlated) with Powell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powell Industries has no effect on the direction of Legrand SA i.e., Legrand SA and Powell Industries go up and down completely randomly.
Pair Corralation between Legrand SA and Powell Industries
Assuming the 90 days horizon Legrand SA ADR is expected to under-perform the Powell Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Legrand SA ADR is 4.03 times less risky than Powell Industries. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Powell Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 25,922 in Powell Industries on August 29, 2024 and sell it today you would earn a total of 1,241 from holding Powell Industries or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legrand SA ADR vs. Powell Industries
Performance |
| Timeline |
| Legrand SA ADR |
| Powell Industries |
Legrand SA and Powell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legrand SA and Powell Industries
The main advantage of trading using opposite Legrand SA and Powell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legrand SA position performs unexpectedly, Powell Industries 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 Powell Industries will offset losses from the drop in Powell Industries' long position.| Legrand SA vs. Novonix Ltd ADR | Legrand SA vs. Ilika plc | Legrand SA vs. FuelPositive Corp | Legrand SA vs. Novonix |
| Powell Industries vs. Kimball Electronics | Powell Industries vs. Hayward Holdings | Powell Industries vs. nVent Electric PLC | Powell Industries vs. Energizer Holdings |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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