Correlation Between Microsoft and Schneider Electric
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Schneider Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Schneider Electric SE, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Schneider Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Schneider Electric.
Diversification Opportunities for Microsoft and Schneider Electric
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Schneider is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Schneider Electric go up and down completely randomly.
Pair Corralation between Microsoft and Schneider Electric
Assuming the 90 days trading horizon Microsoft is expected to generate 1.11 times more return on investment than Schneider Electric. However, Microsoft is 1.11 times more volatile than Schneider Electric SE. It trades about 0.02 of its potential returns per unit of risk. Schneider Electric SE is currently generating about -0.02 per unit of risk. If you would invest 39,955 in Microsoft on August 31, 2024 and sell it today you would earn a total of 140.00 from holding Microsoft or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Schneider Electric SE
Performance |
| Timeline |
| Microsoft |
| Schneider Electric |
Microsoft and Schneider Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Schneider Electric
The main advantage of trading using opposite Microsoft and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Apollo Investment Corp | Microsoft vs. MGIC INVESTMENT | Microsoft vs. LG Display Co |
| Schneider Electric vs. Martin Marietta Materials | Schneider Electric vs. Summit Materials | Schneider Electric vs. APPLIED MATERIALS | Schneider Electric vs. UNITED UTILITIES GR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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