Correlation Between GM Breweries and Siemens

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

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

Diversification Opportunities for GM Breweries and Siemens

0.77

Correlation Coefficient

GM Breweries  Siemens

Poor diversification

The 3 months correlation between GMBREW and Siemens is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Siemens Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Limited and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Siemens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Limited has no effect on the direction of GM Breweries i.e., GM Breweries and Siemens go up and down completely randomly.

Pair Corralation between GM Breweries and Siemens

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 0.85 times more return on investment than Siemens. However, GM Breweries Limited is 1.18 times less risky than Siemens. It trades about -0.05 of its potential returns per unit of risk. Siemens Limited is currently generating about -0.08 per unit of risk. If you would invest  78,540  in GM Breweries Limited on October 26, 2024 and sell it today you would lose (5,480) from holding GM Breweries Limited or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

GM Breweries Limited  vs.  Siemens Limited

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Siemens Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GM Breweries and Siemens

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

The idea behind GM Breweries Limited and Siemens Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.