Correlation Between Siemens Energy and Hitachi Construction

Can any of the company-specific risk be diversified away by investing in both Siemens Energy and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on Siemens Energy and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and Hitachi Construction.

Diversification Opportunities for Siemens Energy and Hitachi Construction

0.19

Correlation Coefficient

Siemens Energy  Hitachi Construction

Average diversification

The 3 months correlation between Siemens and Hitachi is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Siemens Energy i.e., Siemens Energy and Hitachi Construction go up and down completely randomly.

Pair Corralation between Siemens Energy and Hitachi Construction

Assuming the 90 days trading horizon Siemens Energy AG is expected to generate 1.47 times more return on investment than Hitachi Construction. However, Siemens Energy is 1.47 times more volatile than Hitachi Construction Machinery. It trades about -0.02 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.09 per unit of risk. If you would invest  5,150  in Siemens Energy AG on October 5, 2024 and sell it today you would lose (66.00) from holding Siemens Energy AG or give up 1.28% of portfolio value over 90 days.

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

Siemens Energy AG  vs.  Hitachi Construction Machinery

Siemens Energy AG

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Siemens Energy AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hitachi Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Siemens Energy and Hitachi Construction

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

The idea behind Siemens Energy AG and Hitachi Construction Machinery 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.