Correlation Between Schneider Electric and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Schneider Electric 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 Schneider Electric and Legrand SA 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 Legrand SA, you can compare the effects of market volatilities on Schneider Electric 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 Schneider Electric with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and Legrand SA.
Diversification Opportunities for Schneider Electric and Legrand SA
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Schneider and Legrand is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Legrand SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA 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 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 has no effect on the direction of Schneider Electric i.e., Schneider Electric and Legrand SA go up and down completely randomly.
Pair Corralation between Schneider Electric and Legrand SA
Assuming the 90 days horizon Schneider Electric SE is expected to generate 0.79 times more return on investment than Legrand SA. However, Schneider Electric SE is 1.26 times less risky than Legrand SA. It trades about -0.05 of its potential returns per unit of risk. Legrand SA is currently generating about -0.22 per unit of risk. If you would invest 24,515 in Schneider Electric SE on August 28, 2024 and sell it today you would lose (480.00) from holding Schneider Electric SE or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schneider Electric SE vs. Legrand SA
Performance |
| Timeline |
| Schneider Electric |
| Legrand SA |
Schneider Electric and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schneider Electric and Legrand SA
The main advantage of trading using opposite Schneider Electric and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric 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.| Schneider Electric vs. Air Liquide SA | Schneider Electric vs. Vinci SA | Schneider Electric vs. LOreal SA | Schneider Electric vs. Compagnie de Saint Gobain |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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