Correlation Between Schneider Electric and 3M

Can any of the company-specific risk be diversified away by investing in both Schneider Electric and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schneider Electric SE and 3M Company, you can compare the effects of market volatilities on Schneider Electric and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schneider Electric and 3M.

Diversification Opportunities for Schneider Electric and 3M

0.52

Correlation Coefficient

Schneider Electric  3M

Very weak diversification

The 3 months correlation between Schneider and 3M is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 SE are associated (or correlated) with 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Schneider Electric i.e., Schneider Electric and 3M go up and down completely randomly.

Pair Corralation between Schneider Electric and 3M

Assuming the 90 days horizon Schneider Electric SE is expected to under-perform the 3M. In addition to that, Schneider Electric is 1.11 times more volatile than 3M Company. It trades about -0.07 of its total potential returns per unit of risk. 3M Company is currently generating about -0.03 per unit of volatility. If you would invest  12,428  in 3M Company on September 12, 2024 and sell it today you would lose (126.00) from holding 3M Company or give up 1.01% of portfolio value over 90 days.

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

Schneider Electric SE  vs.  3M Company

Schneider Electric

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Schneider Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

3M Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, 3M 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 3M

The main advantage of trading using opposite Schneider Electric and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.

The idea behind Schneider Electric SE and 3M Company 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.