Correlation Between Geely Automobile and Siemens Energy

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Can any of the company-specific risk be diversified away by investing in both Geely Automobile 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 Geely Automobile and Siemens Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geely Automobile Holdings and Siemens Energy AG, you can compare the effects of market volatilities on Geely Automobile 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 Geely Automobile with a short position of Siemens Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Siemens Energy.

Diversification Opportunities for Geely Automobile and Siemens Energy

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Geely and Siemens is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings 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 Geely Automobile 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 Geely Automobile Holdings 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 Geely Automobile i.e., Geely Automobile and Siemens Energy go up and down completely randomly.

Pair Corralation between Geely Automobile and Siemens Energy

Assuming the 90 days horizon Geely Automobile is expected to generate 1.83 times less return on investment than Siemens Energy. But when comparing it to its historical volatility, Geely Automobile Holdings is 1.33 times less risky than Siemens Energy. It trades about 0.05 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,871  in Siemens Energy AG on October 23, 2024 and sell it today you would earn a total of  3,139  from holding Siemens Energy AG or generate 167.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Geely Automobile Holdings  vs.  Siemens Energy AG

 Performance 
       Timeline  
Geely Automobile Holdings 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Geely Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Siemens Energy AG 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Geely Automobile and Siemens Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Geely Automobile and Siemens Energy

The main advantage of trading using opposite Geely Automobile and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile 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 Geely Automobile Holdings 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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