Correlation Between Siemens Energy and SIEMENS AG

Can any of the company-specific risk be diversified away by investing in both Siemens Energy 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 Siemens Energy and SIEMENS AG 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 SIEMENS AG SP, you can compare the effects of market volatilities on Siemens Energy 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 Siemens Energy with a short position of SIEMENS AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and SIEMENS AG.

Diversification Opportunities for Siemens Energy and SIEMENS AG

0.6

Correlation Coefficient

Siemens Energy  SIEMENS AG

Poor diversification

The 3 months correlation between Siemens and SIEMENS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG 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 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 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 Siemens Energy i.e., Siemens Energy and SIEMENS AG go up and down completely randomly.

Pair Corralation between Siemens Energy and SIEMENS AG

Assuming the 90 days trading horizon Siemens Energy is expected to generate 1.33 times less return on investment than SIEMENS AG. In addition to that, Siemens Energy is 1.14 times more volatile than SIEMENS AG SP. It trades about 0.11 of its total potential returns per unit of risk. SIEMENS AG SP is currently generating about 0.16 per unit of volatility. If you would invest  8,750  in SIEMENS AG SP on September 23, 2024 and sell it today you would earn a total of  600.00  from holding SIEMENS AG SP or generate 6.86% return on investment over 90 days.

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

Siemens Energy AG  vs.  SIEMENS AG SP

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.

SIEMENS AG SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, SIEMENS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Energy and SIEMENS AG

The main advantage of trading using opposite Siemens Energy and SIEMENS AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Energy 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 Siemens Energy AG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .