Correlation Between Schneider Electric and Legrand SA

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

Diversification Opportunities for Schneider Electric and Legrand SA

-0.14

Correlation Coefficient

Schneider Electric  Legrand SA

Good diversification

The 3 months correlation between Schneider and Legrand is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Legrand SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA has no effect on the direction of Schneider Electric i.e., Schneider Electric and Legrand SA go up and down completely randomly.

Pair Corralation between Schneider Electric and Legrand SA

Assuming the 90 days horizon Schneider Electric SE is expected to under-perform the Legrand SA. In addition to that, Schneider Electric is 1.26 times more volatile than Legrand SA. It trades about -0.04 of its total potential returns per unit of risk. Legrand SA is currently generating about 0.05 per unit of volatility. If you would invest  9,326  in Legrand SA on December 30, 2024 and sell it today you would earn a total of  558.00  from holding Legrand SA or generate 5.98% 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.  Legrand SA

Schneider Electric

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Legrand SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Legrand SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Schneider Electric and Legrand SA

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

The idea behind Schneider Electric SE and Legrand 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.