Correlation Between Schneider Electric and Smiths Group
Can any of the company-specific risk be diversified away by investing in both Schneider Electric and Smiths Group 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 Smiths Group 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 Smiths Group Plc, you can compare the effects of market volatilities on Schneider Electric and Smiths Group 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 Smiths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and Smiths Group.
Diversification Opportunities for Schneider Electric and Smiths Group
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Schneider and Smiths is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA and Smiths Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smiths Group 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 Smiths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smiths Group Plc has no effect on the direction of Schneider Electric i.e., Schneider Electric and Smiths Group go up and down completely randomly.
Pair Corralation between Schneider Electric and Smiths Group
Assuming the 90 days horizon Schneider Electric SA is expected to under-perform the Smiths Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Schneider Electric SA is 1.7 times less risky than Smiths Group. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Smiths Group Plc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,013 in Smiths Group Plc on August 31, 2024 and sell it today you would earn a total of 272.00 from holding Smiths Group Plc or generate 13.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schneider Electric SA vs. Smiths Group Plc
Performance |
| Timeline |
| Schneider Electric |
| Smiths Group Plc |
Schneider Electric and Smiths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schneider Electric and Smiths Group
The main advantage of trading using opposite Schneider Electric and Smiths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric position performs unexpectedly, Smiths Group 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 Smiths Group will offset losses from the drop in Smiths Group's long position.| Schneider Electric vs. GE Aerospace | Schneider Electric vs. Eaton PLC | Schneider Electric vs. Siemens AG Class | Schneider Electric vs. Schneider Electric SE |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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