Correlation Between Otis Worldwide and SIEMENS AG

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

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

Diversification Opportunities for Otis Worldwide and SIEMENS AG

0.88

Correlation Coefficient

Otis Worldwide  SIEMENS AG

Very poor diversification

The 3 months correlation between Otis and SIEMENS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Otis Worldwide Corp and SIEMENS AG SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIEMENS AG SP and Otis Worldwide 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 Otis Worldwide Corp are associated (or correlated) with SIEMENS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIEMENS AG SP has no effect on the direction of Otis Worldwide i.e., Otis Worldwide and SIEMENS AG go up and down completely randomly.

Pair Corralation between Otis Worldwide and SIEMENS AG

Assuming the 90 days horizon Otis Worldwide Corp is expected to generate 0.71 times more return on investment than SIEMENS AG. However, Otis Worldwide Corp is 1.4 times less risky than SIEMENS AG. It trades about 0.06 of its potential returns per unit of risk. SIEMENS AG SP is currently generating about 0.02 per unit of risk. If you would invest  8,921  in Otis Worldwide Corp on August 31, 2024 and sell it today you would earn a total of  751.00  from holding Otis Worldwide Corp or generate 8.42% return on investment over 90 days.

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

Otis Worldwide Corp  vs.  SIEMENS AG SP

Otis Worldwide Corp

Risk-Adjusted Performance

15 of 100

Good

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

SIEMENS AG SP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, SIEMENS AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Otis Worldwide and SIEMENS AG

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

The idea behind Otis Worldwide Corp and SIEMENS AG SP 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.