Correlation Between Legrand SA and Hydrogen Engine

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

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

Diversification Opportunities for Legrand SA and Hydrogen Engine

0.46

Correlation Coefficient

Legrand SA  Hydrogen Engine

Very weak diversification

The 3 months correlation between Legrand and Hydrogen is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA ADR and Hydrogen Engine Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrogen Engine Center and Legrand SA 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 Legrand SA ADR are associated (or correlated) with Hydrogen Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrogen Engine Center has no effect on the direction of Legrand SA i.e., Legrand SA and Hydrogen Engine go up and down completely randomly.

Pair Corralation between Legrand SA and Hydrogen Engine

Assuming the 90 days horizon Legrand SA is expected to generate 131.01 times less return on investment than Hydrogen Engine. But when comparing it to its historical volatility, Legrand SA ADR is 71.22 times less risky than Hydrogen Engine. It trades about 0.1 of its potential returns per unit of risk. Hydrogen Engine Center is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.65  in Hydrogen Engine Center on November 29, 2024 and sell it today you would earn a total of  3.95  from holding Hydrogen Engine Center or generate 607.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Legrand SA ADR  vs.  Hydrogen Engine Center

Legrand SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA ADR are ranked lower than 8 (%) 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 March 2025.

Hydrogen Engine Center

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrogen Engine Center are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hydrogen Engine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legrand SA and Hydrogen Engine

The main advantage of trading using opposite Legrand SA and Hydrogen Engine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legrand SA position performs unexpectedly, Hydrogen Engine 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 Hydrogen Engine will offset losses from the drop in Hydrogen Engine's long position.

The idea behind Legrand SA ADR and Hydrogen Engine Center 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.