Correlation Between Ford and Schneider Electric

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

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

Diversification Opportunities for Ford and Schneider Electric

0.28

Correlation Coefficient

Ford  Schneider Electric

Modest diversification

The 3 months correlation between Ford and Schneider is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and Ford 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 Ford Motor 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 Ford i.e., Ford and Schneider Electric go up and down completely randomly.

Pair Corralation between Ford and Schneider Electric

Taking into account the 90-day investment horizon Ford is expected to generate 1.5 times less return on investment than Schneider Electric. In addition to that, Ford is 1.32 times more volatile than Schneider Electric SE. It trades about 0.03 of its total potential returns per unit of risk. Schneider Electric SE is currently generating about 0.06 per unit of volatility. If you would invest  23,060  in Schneider Electric SE on September 2, 2024 and sell it today you would earn a total of  1,290  from holding Schneider Electric SE or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Ford Motor  vs.  Schneider Electric SE

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

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

Schneider Electric

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat 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 Ford and Schneider Electric

The main advantage of trading using opposite Ford and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.