Correlation Between Reliance Industries and Siemens

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

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

Diversification Opportunities for Reliance Industries and Siemens

0.48

Correlation Coefficient

Reliance Industries  Siemens

Very weak diversification

The 3 months correlation between Reliance and Siemens is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Siemens Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Limited and Reliance Industries 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 Reliance Industries 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 Reliance Industries i.e., Reliance Industries and Siemens go up and down completely randomly.

Pair Corralation between Reliance Industries and Siemens

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 0.55 times more return on investment than Siemens. However, Reliance Industries Limited is 1.81 times less risky than Siemens. It trades about -0.07 of its potential returns per unit of risk. Siemens Limited is currently generating about -0.39 per unit of risk. If you would invest  129,515  in Reliance Industries Limited on October 10, 2024 and sell it today you would lose (2,965) from holding Reliance Industries Limited or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Reliance Industries Limited  vs.  Siemens Limited

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Reliance Industries and Siemens

The main advantage of trading using opposite Reliance Industries and Siemens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..