Correlation Between SCHNEIDER NATLINC and FirstGroup Plc

Can any of the company-specific risk be diversified away by investing in both SCHNEIDER NATLINC and FirstGroup Plc 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 NATLINC and FirstGroup Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SCHNEIDER NATLINC CLB and FirstGroup plc, you can compare the effects of market volatilities on SCHNEIDER NATLINC and FirstGroup Plc 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 NATLINC with a short position of FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCHNEIDER NATLINC and FirstGroup Plc.

Diversification Opportunities for SCHNEIDER NATLINC and FirstGroup Plc

0.6

Correlation Coefficient

SCHNEIDER NATLINC  FirstGroup Plc

Poor diversification

The 3 months correlation between SCHNEIDER and FirstGroup is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SCHNEIDER NATLINC CLB and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc and SCHNEIDER NATLINC 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 NATLINC CLB are associated (or correlated) with FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of SCHNEIDER NATLINC i.e., SCHNEIDER NATLINC and FirstGroup Plc go up and down completely randomly.

Pair Corralation between SCHNEIDER NATLINC and FirstGroup Plc

Assuming the 90 days trading horizon SCHNEIDER NATLINC CLB is expected to under-perform the FirstGroup Plc. But the stock apears to be less risky and, when comparing its historical volatility, SCHNEIDER NATLINC CLB is 1.57 times less risky than FirstGroup Plc. The stock trades about -0.22 of its potential returns per unit of risk. The FirstGroup plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  186.00  in FirstGroup plc on October 7, 2024 and sell it today you would earn a total of  8.00  from holding FirstGroup plc or generate 4.3% return on investment over 90 days.

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

SCHNEIDER NATLINC CLB  vs.  FirstGroup plc

SCHNEIDER NATLINC CLB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCHNEIDER NATLINC CLB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, SCHNEIDER NATLINC reported solid returns over the last few months and may actually be approaching a breakup point.

FirstGroup plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FirstGroup Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCHNEIDER NATLINC and FirstGroup Plc

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

The idea behind SCHNEIDER NATLINC CLB and FirstGroup plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.