Correlation Between Schneider Electric and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Schneider Electric and Eaton PLC 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 Schneider Electric and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schneider Electric SA and Eaton PLC, you can compare the effects of market volatilities on Schneider Electric and Eaton PLC 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 Schneider Electric with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and Eaton PLC.
Diversification Opportunities for Schneider Electric and Eaton PLC
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Schneider and Eaton is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Schneider Electric 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 Schneider Electric SA are associated (or correlated) with Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of Schneider Electric i.e., Schneider Electric and Eaton PLC go up and down completely randomly.
Pair Corralation between Schneider Electric and Eaton PLC
Assuming the 90 days horizon Schneider Electric is expected to generate 1.93 times less return on investment than Eaton PLC. But when comparing it to its historical volatility, Schneider Electric SA is 1.17 times less risky than Eaton PLC. It trades about 0.05 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 28,837 in Eaton PLC on September 1, 2024 and sell it today you would earn a total of 8,705 from holding Eaton PLC or generate 30.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schneider Electric SA vs. Eaton PLC
Performance |
| Timeline |
| Schneider Electric |
| Eaton PLC |
Schneider Electric and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schneider Electric and Eaton PLC
The main advantage of trading using opposite Schneider Electric and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric position performs unexpectedly, Eaton PLC 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.| Schneider Electric vs. GE Aerospace | Schneider Electric vs. Eaton PLC | Schneider Electric vs. Siemens AG Class | Schneider Electric vs. Parker Hannifin |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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