Correlation Between ETFS Coffee and Siemens Energy

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

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

Diversification Opportunities for ETFS Coffee and Siemens Energy

0.88

Correlation Coefficient

ETFS Coffee  Siemens Energy

Very poor diversification

The 3 months correlation between ETFS and Siemens is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC 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 ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and Siemens Energy go up and down completely randomly.

Pair Corralation between ETFS Coffee and Siemens Energy

Assuming the 90 days trading horizon ETFS Coffee is expected to generate 1.77 times less return on investment than Siemens Energy. In addition to that, ETFS Coffee is 1.16 times more volatile than Siemens Energy AG. It trades about 0.17 of its total potential returns per unit of risk. Siemens Energy AG is currently generating about 0.35 per unit of volatility. If you would invest  2,929  in Siemens Energy AG on September 15, 2024 and sell it today you would earn a total of  1,951  from holding Siemens Energy AG or generate 66.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

ETFS Coffee ETC  vs.  Siemens Energy AG

ETFS Coffee ETC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Siemens Energy AG

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Siemens Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS Coffee and Siemens Energy

The main advantage of trading using opposite ETFS Coffee and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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 ETFS Coffee ETC 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.