Correlation Between Generac Holdings and Schneider Electric

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

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

Diversification Opportunities for Generac Holdings and Schneider Electric

0.13

Correlation Coefficient

Generac Holdings  Schneider Electric

Average diversification

The 3 months correlation between Generac and Schneider is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Schneider Electric SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Generac Holdings 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 Generac Holdings 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 Generac Holdings i.e., Generac Holdings and Schneider Electric go up and down completely randomly.

Pair Corralation between Generac Holdings and Schneider Electric

Given the investment horizon of 90 days Generac Holdings is expected to generate 1.44 times more return on investment than Schneider Electric. However, Generac Holdings is 1.44 times more volatile than Schneider Electric SA. It trades about 0.2 of its potential returns per unit of risk. Schneider Electric SA is currently generating about 0.01 per unit of risk. If you would invest  14,703  in Generac Holdings on August 31, 2024 and sell it today you would earn a total of  4,337  from holding Generac Holdings or generate 29.5% return on investment over 90 days.

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

Generac Holdings  vs.  Schneider Electric SA

Generac Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generac Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Generac Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Schneider Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schneider Electric SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Schneider Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Generac Holdings and Schneider Electric

The main advantage of trading using opposite Generac Holdings and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generac Holdings 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 Generac Holdings and Schneider Electric SA 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.