Correlation Between Schneider Electric and Nidec

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

Diversification Opportunities for Schneider Electric and Nidec

-0.08

Correlation Coefficient

Schneider Electric  Nidec

Good diversification

The 3 months correlation between Schneider and Nidec is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec 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 Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Schneider Electric i.e., Schneider Electric and Nidec go up and down completely randomly.

Pair Corralation between Schneider Electric and Nidec

Assuming the 90 days horizon Schneider Electric SE is expected to generate 0.54 times more return on investment than Nidec. However, Schneider Electric SE is 1.87 times less risky than Nidec. It trades about 0.01 of its potential returns per unit of risk. Nidec is currently generating about -0.07 per unit of risk. If you would invest  23,940  in Schneider Electric SE on September 27, 2024 and sell it today you would earn a total of  45.00  from holding Schneider Electric SE or generate 0.19% return on investment over 90 days.

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

Schneider Electric SE  vs.  Nidec

Schneider Electric

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nidec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nidec are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Nidec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schneider Electric and Nidec

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

The idea behind Schneider Electric SE and Nidec 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.