Correlation Between Legrand SA and Powerstorm Holdings
Can any of the company-specific risk be diversified away by investing in both Legrand SA and Powerstorm Holdings 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 Powerstorm Holdings 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 Powerstorm Holdings, you can compare the effects of market volatilities on Legrand SA and Powerstorm Holdings 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 Powerstorm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legrand SA and Powerstorm Holdings.
Diversification Opportunities for Legrand SA and Powerstorm Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legrand and Powerstorm is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings 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 Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Legrand SA i.e., Legrand SA and Powerstorm Holdings go up and down completely randomly.
Pair Corralation between Legrand SA and Powerstorm Holdings
Assuming the 90 days horizon Legrand SA ADR is expected to generate 0.17 times more return on investment than Powerstorm Holdings. However, Legrand SA ADR is 5.74 times less risky than Powerstorm Holdings. It trades about -0.31 of its potential returns per unit of risk. Powerstorm Holdings is currently generating about -0.25 per unit of risk. If you would invest 2,250 in Legrand SA ADR on September 1, 2024 and sell it today you would lose (257.00) from holding Legrand SA ADR or give up 11.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Legrand SA ADR vs. Powerstorm Holdings
Performance |
| Timeline |
| Legrand SA ADR |
| Powerstorm Holdings |
Legrand SA and Powerstorm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legrand SA and Powerstorm Holdings
The main advantage of trading using opposite Legrand SA and Powerstorm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legrand SA position performs unexpectedly, Powerstorm Holdings 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 Powerstorm Holdings will offset losses from the drop in Powerstorm Holdings' long position.| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Energizer Holdings |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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