Correlation Between Schneider Electric and Aalberts

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

Diversification Opportunities for Schneider Electric and Aalberts

0.68

Correlation Coefficient

Schneider Electric  Aalberts

Poor diversification

The 3 months correlation between Schneider and Aalberts is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and Aalberts NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aalberts NV 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 Aalberts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aalberts NV has no effect on the direction of Schneider Electric i.e., Schneider Electric and Aalberts go up and down completely randomly.

Pair Corralation between Schneider Electric and Aalberts

Assuming the 90 days horizon Schneider Electric SE is expected to generate 1.58 times more return on investment than Aalberts. However, Schneider Electric is 1.58 times more volatile than Aalberts NV. It trades about 0.1 of its potential returns per unit of risk. Aalberts NV is currently generating about -0.36 per unit of risk. If you would invest  22,588  in Schneider Electric SE on February 5, 2024 and sell it today you would earn a total of  777.00  from holding Schneider Electric SE or generate 3.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Schneider Electric SE  vs.  Aalberts NV

Schneider Electric

Risk-Adjusted Performance

11 of 100

Good

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

Aalberts NV

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aalberts NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Aalberts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schneider Electric and Aalberts

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

The idea behind Schneider Electric SE and Aalberts NV 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.