Correlation Between Legrand SA and Eurofins Scientific

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

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

Diversification Opportunities for Legrand SA and Eurofins Scientific

0.14

Correlation Coefficient

Legrand SA  Eurofins Scientific

Average diversification

The 3 months correlation between Legrand and Eurofins is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA and Eurofins Scientific SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurofins Scientific 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 Eurofins Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurofins Scientific has no effect on the direction of Legrand SA i.e., Legrand SA and Eurofins Scientific go up and down completely randomly.

Pair Corralation between Legrand SA and Eurofins Scientific

Assuming the 90 days horizon Legrand SA is expected to generate 1.92 times more return on investment than Eurofins Scientific. However, Legrand SA is 1.92 times more volatile than Eurofins Scientific SE. It trades about 0.1 of its potential returns per unit of risk. Eurofins Scientific SE is currently generating about -0.23 per unit of risk. If you would invest  9,652  in Legrand SA on December 4, 2024 and sell it today you would earn a total of  473.00  from holding Legrand SA or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Legrand SA  vs.  Eurofins Scientific SE

Legrand SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Legrand SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eurofins Scientific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eurofins Scientific SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Eurofins Scientific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legrand SA and Eurofins Scientific

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

The idea behind Legrand SA and Eurofins Scientific 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.