Correlation Between Trane Technologies and Schneider Electric

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

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

Diversification Opportunities for Trane Technologies and Schneider Electric

0.71

Correlation Coefficient

Trane Technologies  Schneider Electric

Poor diversification

The 3 months correlation between Trane and Schneider is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Trane Technologies 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 Trane Technologies plc 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 Trane Technologies i.e., Trane Technologies and Schneider Electric go up and down completely randomly.

Pair Corralation between Trane Technologies and Schneider Electric

Assuming the 90 days horizon Trane Technologies plc is expected to generate 1.12 times more return on investment than Schneider Electric. However, Trane Technologies is 1.12 times more volatile than Schneider Electric SE. It trades about 0.12 of its potential returns per unit of risk. Schneider Electric SE is currently generating about 0.1 per unit of risk. If you would invest  15,458  in Trane Technologies plc on September 12, 2024 and sell it today you would earn a total of  22,592  from holding Trane Technologies plc or generate 146.15% return on investment over 90 days.

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

Trane Technologies plc  vs.  Schneider Electric SE

Trane Technologies plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trane Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Schneider Electric

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Schneider Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Trane Technologies and Schneider Electric

The main advantage of trading using opposite Trane Technologies and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies 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 Trane Technologies plc and Schneider Electric SE 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 Global Correlations module to find global opportunities by holding instruments from different markets.