Correlation Between Schneider Electric and Ballard Power

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

Diversification Opportunities for Schneider Electric and Ballard Power

-0.39

Correlation Coefficient

Schneider Electric  Ballard Power

Very good diversification

The 3 months correlation between Schneider and Ballard is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems 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 Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Schneider Electric i.e., Schneider Electric and Ballard Power go up and down completely randomly.

Pair Corralation between Schneider Electric and Ballard Power

Assuming the 90 days trading horizon Schneider Electric SE is expected to generate 0.34 times more return on investment than Ballard Power. However, Schneider Electric SE is 2.97 times less risky than Ballard Power. It trades about 0.08 of its potential returns per unit of risk. Ballard Power Systems is currently generating about 0.01 per unit of risk. If you would invest  22,475  in Schneider Electric SE on September 4, 2024 and sell it today you would earn a total of  1,825  from holding Schneider Electric SE or generate 8.12% 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.  Ballard Power Systems

Schneider Electric

Risk-Adjusted Performance

6 of 100

Modest

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. In spite of comparatively uncertain fundamental indicators, Schneider Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ballard Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ballard Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ballard Power 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 Ballard Power

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

The idea behind Schneider Electric SE and Ballard Power Systems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.