Correlation Between Siemens Energy and Realord Group

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

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

Diversification Opportunities for Siemens Energy and Realord Group

0.83

Correlation Coefficient

Siemens Energy  Realord Group

Very poor diversification

The 3 months correlation between Siemens and Realord is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Realord Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realord Group Holdings and Siemens Energy 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 Siemens Energy AG are associated (or correlated) with Realord Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realord Group Holdings has no effect on the direction of Siemens Energy i.e., Siemens Energy and Realord Group go up and down completely randomly.

Pair Corralation between Siemens Energy and Realord Group

Assuming the 90 days trading horizon Siemens Energy AG is expected to generate 0.99 times more return on investment than Realord Group. However, Siemens Energy AG is 1.01 times less risky than Realord Group. It trades about 0.07 of its potential returns per unit of risk. Realord Group Holdings is currently generating about -0.04 per unit of risk. If you would invest  4,925  in Siemens Energy AG on September 24, 2024 and sell it today you would earn a total of  145.00  from holding Siemens Energy AG or generate 2.94% return on investment over 90 days.

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

Siemens Energy AG  vs.  Realord Group Holdings

Siemens Energy AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Realord Group Holdings

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Siemens Energy and Realord Group

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

The idea behind Siemens Energy AG and Realord Group Holdings 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.