Correlation Between Air Liquide and Schneider Electric

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

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

Diversification Opportunities for Air Liquide and Schneider Electric

-0.62

Correlation Coefficient

Air Liquide  Schneider Electric

Excellent diversification

The 3 months correlation between Air and Schneider is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Air Liquide SA and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Air Liquide 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 Air Liquide SA 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 Air Liquide i.e., Air Liquide and Schneider Electric go up and down completely randomly.

Pair Corralation between Air Liquide and Schneider Electric

Assuming the 90 days horizon Air Liquide SA is expected to generate 0.4 times more return on investment than Schneider Electric. However, Air Liquide SA is 2.49 times less risky than Schneider Electric. It trades about 0.2 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  15,462  in Air Liquide SA on December 29, 2024 and sell it today you would earn a total of  2,170  from holding Air Liquide SA or generate 14.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Air Liquide SA  vs.  Schneider Electric SE

Air Liquide SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Liquide SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Liquide sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Air Liquide and Schneider Electric

The main advantage of trading using opposite Air Liquide and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Liquide 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 Air Liquide SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.