Correlation Between Legrand SA and Poujoulat

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

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

Diversification Opportunities for Legrand SA and Poujoulat

0.78

Correlation Coefficient

Legrand SA  Poujoulat

Poor diversification

The 3 months correlation between Legrand and Poujoulat is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA and Poujoulat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poujoulat SA 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 are associated (or correlated) with Poujoulat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poujoulat SA has no effect on the direction of Legrand SA i.e., Legrand SA and Poujoulat go up and down completely randomly.

Pair Corralation between Legrand SA and Poujoulat

Assuming the 90 days horizon Legrand SA is expected to generate 1.1 times less return on investment than Poujoulat. In addition to that, Legrand SA is 1.15 times more volatile than Poujoulat SA. It trades about 0.1 of its total potential returns per unit of risk. Poujoulat SA is currently generating about 0.12 per unit of volatility. If you would invest  980.00  in Poujoulat SA on December 1, 2024 and sell it today you would earn a total of  125.00  from holding Poujoulat SA or generate 12.76% return on investment over 90 days.

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

Legrand SA  vs.  Poujoulat SA

Legrand SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Legrand SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Poujoulat SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Poujoulat SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Poujoulat reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legrand SA and Poujoulat

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

The idea behind Legrand SA and Poujoulat 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..