Correlation Between Schindler Holding and SMC Corp

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

By analyzing existing cross correlation between Schindler Holding AG and SMC Corp Japan, you can compare the effects of market volatilities on Schindler Holding and SMC Corp 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 Schindler Holding with a short position of SMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schindler Holding and SMC Corp.

Diversification Opportunities for Schindler Holding and SMC Corp

0.79

Correlation Coefficient

Schindler Holding  SMC Corp

Poor diversification

The 3 months correlation between Schindler and SMC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Schindler Holding AG and SMC Corp Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp Japan and Schindler Holding 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 Schindler Holding AG are associated (or correlated) with SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp Japan has no effect on the direction of Schindler Holding i.e., Schindler Holding and SMC Corp go up and down completely randomly.

Pair Corralation between Schindler Holding and SMC Corp

Assuming the 90 days horizon Schindler Holding AG is expected to generate 0.64 times more return on investment than SMC Corp. However, Schindler Holding AG is 1.57 times less risky than SMC Corp. It trades about -0.03 of its potential returns per unit of risk. SMC Corp Japan is currently generating about -0.15 per unit of risk. If you would invest  25,486  in Schindler Holding AG on February 5, 2024 and sell it today you would lose (408.00) from holding Schindler Holding AG or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Schindler Holding AG  vs.  SMC Corp Japan

Schindler Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schindler Holding AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schindler Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SMC Corp Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schindler Holding and SMC Corp

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

The idea behind Schindler Holding AG and SMC Corp Japan 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.