Correlation Between Fanuc and Siemens Energy

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

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

Diversification Opportunities for Fanuc and Siemens Energy

-0.39

Correlation Coefficient

Fanuc  Siemens Energy

Very good diversification

The 3 months correlation between Fanuc and Siemens is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG and Fanuc 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 Fanuc are associated (or correlated) with Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of Fanuc i.e., Fanuc and Siemens Energy go up and down completely randomly.

Pair Corralation between Fanuc and Siemens Energy

Assuming the 90 days horizon Fanuc is expected to under-perform the Siemens Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fanuc is 1.76 times less risky than Siemens Energy. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Siemens Energy AG is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Siemens Energy AG on August 31, 2024 and sell it today you would earn a total of  1,340  from holding Siemens Energy AG or generate 32.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Fanuc  vs.  Siemens Energy AG

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Siemens Energy AG

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Siemens Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fanuc and Siemens Energy

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

The idea behind Fanuc and Siemens Energy AG 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.