Correlation Between Schneider Electric and Cummins
Can any of the company-specific risk be diversified away by investing in both Schneider Electric and Cummins 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 Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schneider Electric SE and Cummins, you can compare the effects of market volatilities on Schneider Electric and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and Cummins.
Diversification Opportunities for Schneider Electric and Cummins
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Schneider and Cummins is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 SE are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Schneider Electric i.e., Schneider Electric and Cummins go up and down completely randomly.
Pair Corralation between Schneider Electric and Cummins
Assuming the 90 days horizon Schneider Electric is expected to generate 11.29 times less return on investment than Cummins. But when comparing it to its historical volatility, Schneider Electric SE is 1.07 times less risky than Cummins. It trades about 0.02 of its potential returns per unit of risk. Cummins is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 33,411 in Cummins on September 13, 2024 and sell it today you would earn a total of 2,399 from holding Cummins or generate 7.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schneider Electric SE vs. Cummins
Performance |
| Timeline |
| Schneider Electric |
| Cummins |
Schneider Electric and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schneider Electric and Cummins
The main advantage of trading using opposite Schneider Electric and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Schneider Electric vs. SALESFORCE INC CDR | Schneider Electric vs. CARSALESCOM | Schneider Electric vs. Sims Metal Management | Schneider Electric vs. Tradeweb Markets |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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