Correlation Between SMA Solar and Siemens Aktiengesellscha

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

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

Diversification Opportunities for SMA Solar and Siemens Aktiengesellscha

-0.47

Correlation Coefficient

SMA Solar  Siemens Aktiengesellscha

Very good diversification

The 3 months correlation between SMA and Siemens is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Siemens Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Aktiengesellscha and SMA Solar 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 SMA Solar Technology are associated (or correlated) with Siemens Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Aktiengesellscha has no effect on the direction of SMA Solar i.e., SMA Solar and Siemens Aktiengesellscha go up and down completely randomly.

Pair Corralation between SMA Solar and Siemens Aktiengesellscha

Assuming the 90 days horizon SMA Solar Technology is expected to generate 3.0 times more return on investment than Siemens Aktiengesellscha. However, SMA Solar is 3.0 times more volatile than Siemens Aktiengesellschaft. It trades about 0.27 of its potential returns per unit of risk. Siemens Aktiengesellschaft is currently generating about 0.06 per unit of risk. If you would invest  1,185  in SMA Solar Technology on September 15, 2024 and sell it today you would earn a total of  293.00  from holding SMA Solar Technology or generate 24.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SMA Solar Technology  vs.  Siemens Aktiengesellschaft

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Siemens Aktiengesellscha

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Siemens Aktiengesellscha unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMA Solar and Siemens Aktiengesellscha

The main advantage of trading using opposite SMA Solar and Siemens Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Siemens Aktiengesellscha 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 Aktiengesellscha will offset losses from the drop in Siemens Aktiengesellscha's long position.

The idea behind SMA Solar Technology and Siemens Aktiengesellschaft 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.