Correlation Between Eguana Technologies and Legrand SA

Can any of the company-specific risk be diversified away by investing in both Eguana Technologies 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 Eguana Technologies and Legrand SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eguana Technologies and Legrand SA ADR, you can compare the effects of market volatilities on Eguana Technologies 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 Eguana Technologies with a short position of Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eguana Technologies and Legrand SA.

Diversification Opportunities for Eguana Technologies and Legrand SA

-0.29

Correlation Coefficient

Eguana Technologies  Legrand SA

Very good diversification

The 3 months correlation between Eguana and Legrand is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Eguana Technologies and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR and Eguana Technologies 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 Eguana Technologies 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 ADR has no effect on the direction of Eguana Technologies i.e., Eguana Technologies and Legrand SA go up and down completely randomly.

Pair Corralation between Eguana Technologies and Legrand SA

Assuming the 90 days horizon Eguana Technologies is expected to generate 9.39 times more return on investment than Legrand SA. However, Eguana Technologies is 9.39 times more volatile than Legrand SA ADR. It trades about 0.09 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.08 per unit of risk. If you would invest  1.00  in Eguana Technologies on December 30, 2024 and sell it today you would lose (0.15) from holding Eguana Technologies or give up 15.0% of portfolio value over 90 days.

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

Eguana Technologies  vs.  Legrand SA ADR

Eguana Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eguana Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Eguana Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Legrand SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Legrand SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Eguana Technologies and Legrand SA

The main advantage of trading using opposite Eguana Technologies and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eguana Technologies 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.

The idea behind Eguana Technologies and Legrand SA ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.