Correlation Between Kone Oyj and Schneider Electric

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

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

Diversification Opportunities for Kone Oyj and Schneider Electric

0.62

Correlation Coefficient

Kone Oyj  Schneider Electric

Poor diversification

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

Pair Corralation between Kone Oyj and Schneider Electric

Assuming the 90 days horizon Kone Oyj ADR is expected to under-perform the Schneider Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kone Oyj ADR is 1.47 times less risky than Schneider Electric. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Schneider Electric SE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,950  in Schneider Electric SE on August 31, 2024 and sell it today you would earn a total of  650.00  from holding Schneider Electric SE or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Kone Oyj ADR  vs.  Schneider Electric SE

Kone Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Schneider Electric

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schneider Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kone Oyj and Schneider Electric

The main advantage of trading using opposite Kone Oyj and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kone Oyj 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 Kone Oyj ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.