Correlation Between Sandvik AB and Schneider Electric

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

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

Diversification Opportunities for Sandvik AB and Schneider Electric

-0.36

Correlation Coefficient

Sandvik AB  Schneider Electric

Very good diversification

The 3 months correlation between Sandvik and Schneider is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Schneider Electric SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Sandvik AB 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 Sandvik AB are associated (or correlated) with Schneider Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider Electric has no effect on the direction of Sandvik AB i.e., Sandvik AB and Schneider Electric go up and down completely randomly.

Pair Corralation between Sandvik AB and Schneider Electric

Assuming the 90 days horizon Sandvik AB is expected to generate 0.94 times more return on investment than Schneider Electric. However, Sandvik AB is 1.06 times less risky than Schneider Electric. It trades about 0.16 of its potential returns per unit of risk. Schneider Electric SA is currently generating about -0.03 per unit of risk. If you would invest  1,792  in Sandvik AB on December 30, 2024 and sell it today you would earn a total of  446.00  from holding Sandvik AB or generate 24.89% return on investment over 90 days.

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

Sandvik AB  vs.  Schneider Electric SA

Sandvik AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Sandvik AB reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sandvik AB and Schneider Electric

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

The idea behind Sandvik AB and Schneider Electric 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.