Correlation Between Schneider Electric and SMC Corp

Can any of the company-specific risk be diversified away by investing in both Schneider Electric and SMC Corp 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 SMC Corp 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 SMC Corp, you can compare the effects of market volatilities on Schneider Electric and SMC Corp 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 SMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and SMC Corp.

Diversification Opportunities for Schneider Electric and SMC Corp

0.03

Correlation Coefficient

Schneider Electric  SMC Corp

Significant diversification

The 3 months correlation between Schneider and SMC is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA and SMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp 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 SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp has no effect on the direction of Schneider Electric i.e., Schneider Electric and SMC Corp go up and down completely randomly.

Pair Corralation between Schneider Electric and SMC Corp

Assuming the 90 days horizon Schneider Electric SA is expected to under-perform the SMC Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Schneider Electric SA is 1.23 times less risky than SMC Corp. The pink sheet trades about -0.03 of its potential returns per unit of risk. The SMC Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  37,510  in SMC Corp on December 29, 2024 and sell it today you would lose (860.00) from holding SMC Corp or give up 2.29% of portfolio value over 90 days.

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

Schneider Electric SA  vs.  SMC Corp

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.

SMC Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days SMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Schneider Electric and SMC Corp

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

The idea behind Schneider Electric SA and SMC Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.