Correlation Between Donaldson and Siemens AG

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

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

Diversification Opportunities for Donaldson and Siemens AG

0.47

Correlation Coefficient

Donaldson  Siemens AG

Very weak diversification

The 3 months correlation between Donaldson and Siemens is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and Siemens AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG ADR and Donaldson 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 Donaldson 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 ADR has no effect on the direction of Donaldson i.e., Donaldson and Siemens AG go up and down completely randomly.

Pair Corralation between Donaldson and Siemens AG

If you would invest  7,105  in Donaldson on August 31, 2024 and sell it today you would earn a total of  700.00  from holding Donaldson or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Donaldson  vs.  Siemens AG ADR

Donaldson

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Donaldson are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Donaldson may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Siemens AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Donaldson and Siemens AG

The main advantage of trading using opposite Donaldson and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donaldson 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 Donaldson and Siemens AG ADR 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.