Correlation Between Nexans SA and Schneider Electric
Can any of the company-specific risk be diversified away by investing in both Nexans SA 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 Nexans SA and Schneider Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nexans SA and Schneider Electric SE, you can compare the effects of market volatilities on Nexans SA 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 Nexans SA with a short position of Schneider Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexans SA and Schneider Electric.
Diversification Opportunities for Nexans SA and Schneider Electric
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nexans and Schneider is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nexans SA and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Nexans 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 Nexans SA 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 Nexans SA i.e., Nexans SA and Schneider Electric go up and down completely randomly.
Pair Corralation between Nexans SA and Schneider Electric
Assuming the 90 days trading horizon Nexans SA is expected to under-perform the Schneider Electric. In addition to that, Nexans SA is 1.71 times more volatile than Schneider Electric SE. It trades about -0.43 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 24,515 in Schneider Electric SE on August 28, 2024 and sell it today you would lose (480.00) from holding Schneider Electric SE or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nexans SA vs. Schneider Electric SE
Performance |
| Timeline |
| Nexans SA |
| Schneider Electric |
Nexans SA and Schneider Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nexans SA and Schneider Electric
The main advantage of trading using opposite Nexans SA and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexans SA 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.The idea behind Nexans SA and Schneider Electric SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Schneider Electric vs. Air Liquide SA | Schneider Electric vs. Vinci SA | Schneider Electric vs. LOreal SA | Schneider Electric vs. Compagnie de Saint Gobain |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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