Correlation Between Eos Energy and Legrand SA

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

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

Diversification Opportunities for Eos Energy and Legrand SA

-0.42

Correlation Coefficient

Eos Energy  Legrand SA

Very good diversification

The 3 months correlation between Eos and Legrand is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises 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 Eos Energy 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 Eos Energy Enterprises 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 Eos Energy i.e., Eos Energy and Legrand SA go up and down completely randomly.

Pair Corralation between Eos Energy and Legrand SA

Assuming the 90 days horizon Eos Energy Enterprises is expected to generate 9.55 times more return on investment than Legrand SA. However, Eos Energy is 9.55 times more volatile than Legrand SA ADR. It trades about 0.08 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.03 per unit of risk. If you would invest  37.00  in Eos Energy Enterprises on October 4, 2024 and sell it today you would earn a total of  61.00  from holding Eos Energy Enterprises or generate 164.86% return on investment over 90 days.

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

Eos Energy Enterprises  vs.  Legrand SA ADR

Eos Energy Enterprises

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Eos Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Legrand SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legrand SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eos Energy and Legrand SA

The main advantage of trading using opposite Eos Energy and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eos Energy 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 Eos Energy Enterprises 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.