Correlation Between Otis Worldwide and Schneider Electric

Can any of the company-specific risk be diversified away by investing in both Otis Worldwide and Schneider Electric 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 Otis Worldwide and Schneider Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Otis Worldwide Corp and Schneider Electric SE, you can compare the effects of market volatilities on Otis Worldwide and Schneider Electric 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 Otis Worldwide with a short position of Schneider Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otis Worldwide and Schneider Electric.

Diversification Opportunities for Otis Worldwide and Schneider Electric

-0.49

Correlation Coefficient

Otis Worldwide  Schneider Electric

Very good diversification

The 3 months correlation between Otis and Schneider is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Otis Worldwide Corp and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Otis Worldwide 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 Otis Worldwide Corp are associated (or correlated) with Schneider Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider Electric has no effect on the direction of Otis Worldwide i.e., Otis Worldwide and Schneider Electric go up and down completely randomly.

Pair Corralation between Otis Worldwide and Schneider Electric

Assuming the 90 days horizon Otis Worldwide Corp is expected to generate 0.45 times more return on investment than Schneider Electric. However, Otis Worldwide Corp is 2.24 times less risky than Schneider Electric. It trades about 0.09 of its potential returns per unit of risk. Schneider Electric SE is currently generating about -0.04 per unit of risk. If you would invest  8,884  in Otis Worldwide Corp on December 28, 2024 and sell it today you would earn a total of  594.00  from holding Otis Worldwide Corp or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Otis Worldwide Corp  vs.  Schneider Electric SE

Otis Worldwide Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Otis Worldwide may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Schneider Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schneider Electric SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Otis Worldwide and Schneider Electric

The main advantage of trading using opposite Otis Worldwide and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otis Worldwide position performs unexpectedly, Schneider Electric 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 Schneider Electric will offset losses from the drop in Schneider Electric's long position.

The idea behind Otis Worldwide Corp and Schneider Electric SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.