Correlation Between GE Aerospace and Schneider Electric

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

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

Diversification Opportunities for GE Aerospace and Schneider Electric

0.68

Correlation Coefficient

GE Aerospace  Schneider Electric

Poor diversification

The 3 months correlation between GE Aerospace and Schneider is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Schneider Electric SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider Electric and GE Aerospace 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 GE Aerospace 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 GE Aerospace i.e., GE Aerospace and Schneider Electric go up and down completely randomly.

Pair Corralation between GE Aerospace and Schneider Electric

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.85 times more return on investment than Schneider Electric. However, GE Aerospace is 1.18 times less risky than Schneider Electric. It trades about 0.09 of its potential returns per unit of risk. Schneider Electric SE is currently generating about 0.01 per unit of risk. If you would invest  16,397  in GE Aerospace on August 31, 2024 and sell it today you would earn a total of  1,663  from holding GE Aerospace or generate 10.14% return on investment over 90 days.

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

GE Aerospace  vs.  Schneider Electric SE

GE Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Schneider Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schneider Electric SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Schneider Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GE Aerospace and Schneider Electric

The main advantage of trading using opposite GE Aerospace and Schneider Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.