Correlation Between PVA TePla and Schneider Electric

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

By analyzing existing cross correlation between PVA TePla AG and Schneider Electric SA, you can compare the effects of market volatilities on PVA TePla and Schneider Electric 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 PVA TePla with a short position of Schneider Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of PVA TePla and Schneider Electric.

Diversification Opportunities for PVA TePla and Schneider Electric

0.58

Correlation Coefficient

PVA TePla  Schneider Electric

Very weak diversification

The 3 months correlation between PVA and Schneider is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PVA TePla AG and Schneider Electric SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and PVA TePla 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 PVA TePla AG are associated (or correlated) with Schneider Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider Electric has no effect on the direction of PVA TePla i.e., PVA TePla and Schneider Electric go up and down completely randomly.

Pair Corralation between PVA TePla and Schneider Electric

Assuming the 90 days horizon PVA TePla AG is expected to under-perform the Schneider Electric. In addition to that, PVA TePla is 1.61 times more volatile than Schneider Electric SA. It trades about -0.07 of its total potential returns per unit of risk. Schneider Electric SA is currently generating about 0.02 per unit of volatility. If you would invest  4,840  in Schneider Electric SA on September 25, 2024 and sell it today you would earn a total of  162.00  from holding Schneider Electric SA or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

PVA TePla AG  vs.  Schneider Electric SA

PVA TePla AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVA TePla AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Schneider Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schneider Electric SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Schneider Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PVA TePla and Schneider Electric

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

The idea behind PVA TePla AG and Schneider Electric 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.