Correlation Between Gorman Rupp and Siemens AG

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

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

Diversification Opportunities for Gorman Rupp and Siemens AG

-0.63

Correlation Coefficient

Gorman Rupp  Siemens AG

Excellent diversification

The 3 months correlation between Gorman and Siemens is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Siemens AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG ADR and Gorman Rupp 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 Gorman Rupp 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 ADR has no effect on the direction of Gorman Rupp i.e., Gorman Rupp and Siemens AG go up and down completely randomly.

Pair Corralation between Gorman Rupp and Siemens AG

Considering the 90-day investment horizon Gorman Rupp is expected to generate 1.12 times less return on investment than Siemens AG. In addition to that, Gorman Rupp is 1.48 times more volatile than Siemens AG ADR. It trades about 0.05 of its total potential returns per unit of risk. Siemens AG ADR is currently generating about 0.08 per unit of volatility. If you would invest  7,726  in Siemens AG ADR on October 11, 2024 and sell it today you would earn a total of  109.00  from holding Siemens AG ADR or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	3.03%
Values	Daily Returns

Gorman Rupp  vs.  Siemens AG ADR

Gorman Rupp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gorman Rupp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gorman Rupp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Siemens AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Siemens AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gorman Rupp and Siemens AG

The main advantage of trading using opposite Gorman Rupp and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gorman Rupp 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 Gorman Rupp and Siemens AG ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.