Correlation Between Powell Industries and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Powell Industries and Legrand SA 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 Powell Industries and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Powell Industries and Legrand SA ADR, you can compare the effects of market volatilities on Powell Industries and Legrand SA 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 Powell Industries with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Powell Industries and Legrand SA.
Diversification Opportunities for Powell Industries and Legrand SA
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Powell and Legrand is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR and Powell Industries 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 Powell Industries are associated (or correlated) with Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Powell Industries i.e., Powell Industries and Legrand SA go up and down completely randomly.
Pair Corralation between Powell Industries and Legrand SA
Given the investment horizon of 90 days Powell Industries is expected to generate 4.11 times more return on investment than Legrand SA. However, Powell Industries is 4.11 times more volatile than Legrand SA ADR. It trades about 0.12 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.0 per unit of risk. If you would invest 8,788 in Powell Industries on August 25, 2024 and sell it today you would earn a total of 20,200 from holding Powell Industries or generate 229.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Powell Industries vs. Legrand SA ADR
Performance |
| Timeline |
| Powell Industries |
| Legrand SA ADR |
Powell Industries and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Powell Industries and Legrand SA
The main advantage of trading using opposite Powell Industries and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powell Industries position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA's long position.| Powell Industries vs. Kimball Electronics | Powell Industries vs. Hayward Holdings | Powell Industries vs. nVent Electric PLC | Powell Industries vs. Energizer Holdings |
| Legrand SA vs. FREYR Battery SA | Legrand SA vs. nVent Electric PLC | Legrand SA vs. Hubbell | Legrand SA vs. Advanced Energy Industries |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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