Correlation Between Spirent Communications and Schneider Electric

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

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

Diversification Opportunities for Spirent Communications and Schneider Electric

0.5

Correlation Coefficient

Spirent Communications  Schneider Electric

Very weak diversification

The 3 months correlation between Spirent and Schneider is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Schneider Electric go up and down completely randomly.

Pair Corralation between Spirent Communications and Schneider Electric

Assuming the 90 days horizon Spirent Communications is expected to generate 1.32 times less return on investment than Schneider Electric. But when comparing it to its historical volatility, Spirent Communications plc is 1.4 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 0.09 of returns per unit of risk over similar time horizon. If you would invest  22,575  in Schneider Electric SE on September 13, 2024 and sell it today you would earn a total of  1,715  from holding Schneider Electric SE or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Spirent Communications plc  vs.  Schneider Electric SE

Spirent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Schneider Electric

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schneider Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spirent Communications and Schneider Electric

The main advantage of trading using opposite Spirent Communications and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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 Spirent Communications plc 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 CEOs Directory module to screen CEOs from public companies around the world.