Correlation Between Schneider Electric and ABB

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

Diversification Opportunities for Schneider Electric and ABB

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Schneider and ABB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SE and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Schneider Electric i.e., Schneider Electric and ABB go up and down completely randomly.

Pair Corralation between Schneider Electric and ABB

Assuming the 90 days horizon Schneider Electric is expected to generate 5.64 times less return on investment than ABB. But when comparing it to its historical volatility, Schneider Electric SE is 1.05 times less risky than ABB. It trades about 0.03 of its potential returns per unit of risk. ABB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,800  in ABB on May 5, 2025 and sell it today you would earn a total of  980.00  from holding ABB or generate 20.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Schneider Electric SE  vs.  ABB

 Performance 
       Timeline  
Schneider Electric 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schneider Electric is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
ABB 

Risk-Adjusted Performance

Good

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

Schneider Electric and ABB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schneider Electric and ABB

The main advantage of trading using opposite Schneider Electric and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.
The idea behind Schneider Electric SE and ABB 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.
Check out your portfolio center.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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