Correlation Between SGS SA and Legrand SA
Can any of the company-specific risk be diversified away by investing in both SGS SA 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 SGS SA and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGS SA and Legrand SA ADR, you can compare the effects of market volatilities on SGS SA 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 SGS SA with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Legrand SA.
Diversification Opportunities for SGS SA and Legrand SA
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SGS and Legrand is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA 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 SGS 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 SGS SA 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 SGS SA i.e., SGS SA and Legrand SA go up and down completely randomly.
Pair Corralation between SGS SA and Legrand SA
Assuming the 90 days horizon SGS SA is expected to generate 1.0 times more return on investment than Legrand SA. However, SGS SA is 1.0 times less risky than Legrand SA. It trades about 0.05 of its potential returns per unit of risk. Legrand SA ADR is currently generating about -0.03 per unit of risk. If you would invest 912.00 in SGS SA on September 1, 2024 and sell it today you would earn a total of 70.00 from holding SGS SA or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGS SA vs. Legrand SA ADR
Performance |
| Timeline |
| SGS SA |
| Legrand SA ADR |
SGS SA and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SGS SA and Legrand SA
The main advantage of trading using opposite SGS SA and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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.| SGS SA vs. Willamette Valley Vineyards | SGS SA vs. China Tontine Wines | SGS SA vs. PepsiCo | SGS SA vs. Thor Industries |
| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Energizer Holdings |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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