Correlation Between Quality Industrial and Siemens AG

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

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

Diversification Opportunities for Quality Industrial and Siemens AG

-0.6

Correlation Coefficient

Quality Industrial  Siemens AG

Excellent diversification

The 3 months correlation between Quality and Siemens is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Quality Industrial Corp and Siemens AG Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG Class and Quality Industrial 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 Quality Industrial Corp 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 Class has no effect on the direction of Quality Industrial i.e., Quality Industrial and Siemens AG go up and down completely randomly.

Pair Corralation between Quality Industrial and Siemens AG

Given the investment horizon of 90 days Quality Industrial Corp is expected to generate 7.21 times more return on investment than Siemens AG. However, Quality Industrial is 7.21 times more volatile than Siemens AG Class. It trades about 0.08 of its potential returns per unit of risk. Siemens AG Class is currently generating about 0.05 per unit of risk. If you would invest  6.30  in Quality Industrial Corp on September 3, 2024 and sell it today you would earn a total of  1.20  from holding Quality Industrial Corp or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Quality Industrial Corp  vs.  Siemens AG Class

Quality Industrial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Industrial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Quality Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Siemens AG Class

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens AG Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Siemens AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Quality Industrial and Siemens AG

The main advantage of trading using opposite Quality Industrial and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quality Industrial 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 Quality Industrial Corp and Siemens AG Class 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.