Correlation Between Legrand SA and Prodways Group

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

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

Diversification Opportunities for Legrand SA and Prodways Group

-0.16

Correlation Coefficient

Legrand SA  Prodways Group

Good diversification

The 3 months correlation between Legrand and Prodways is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Legrand SA and Prodways Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodways Group 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 Prodways Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodways Group SA has no effect on the direction of Legrand SA i.e., Legrand SA and Prodways Group go up and down completely randomly.

Pair Corralation between Legrand SA and Prodways Group

Assuming the 90 days horizon Legrand SA is expected to generate 1.71 times less return on investment than Prodways Group. But when comparing it to its historical volatility, Legrand SA is 2.99 times less risky than Prodways Group. It trades about 0.3 of its potential returns per unit of risk. Prodways Group SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Prodways Group SA on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Prodways Group SA or generate 9.62% return on investment over 90 days.

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

Legrand SA  vs.  Prodways Group SA

Legrand SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legrand SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Prodways Group SA

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prodways Group SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Prodways Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Legrand SA and Prodways Group

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

The idea behind Legrand SA and Prodways Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.