Correlation Between Schneider Electric and Kone Oyj

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

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

Diversification Opportunities for Schneider Electric and Kone Oyj

-0.32

Correlation Coefficient

Schneider Electric  Kone Oyj

Very good diversification

The 3 months correlation between Schneider and Kone is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA and Kone Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kone Oyj ADR and Schneider Electric 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 Schneider Electric SA are associated (or correlated) with Kone Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kone Oyj ADR has no effect on the direction of Schneider Electric i.e., Schneider Electric and Kone Oyj go up and down completely randomly.

Pair Corralation between Schneider Electric and Kone Oyj

Assuming the 90 days horizon Schneider Electric SA is expected to under-perform the Kone Oyj. In addition to that, Schneider Electric is 1.9 times more volatile than Kone Oyj ADR. It trades about -0.03 of its total potential returns per unit of risk. Kone Oyj ADR is currently generating about 0.16 per unit of volatility. If you would invest  2,442  in Kone Oyj ADR on December 30, 2024 and sell it today you would earn a total of  339.00  from holding Kone Oyj ADR or generate 13.88% return on investment over 90 days.

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

Schneider Electric SA  vs.  Kone Oyj ADR

Schneider Electric

Risk-Adjusted Performance

Very Weak

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

Kone Oyj ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kone Oyj ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking indicators, Kone Oyj showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schneider Electric and Kone Oyj

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

The idea behind Schneider Electric SA and Kone Oyj ADR 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.