Correlation Between Schneider Electric and Siemens AG

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

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

Diversification Opportunities for Schneider Electric and Siemens AG

-0.14

Correlation Coefficient

Schneider Electric  Siemens AG

Good diversification

The 3 months correlation between Schneider and Siemens is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA 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 Schneider Electric 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 Schneider Electric SA 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 Schneider Electric i.e., Schneider Electric and Siemens AG go up and down completely randomly.

Pair Corralation between Schneider Electric and Siemens AG

Assuming the 90 days horizon Schneider Electric is expected to generate 10.47 times less return on investment than Siemens AG. In addition to that, Schneider Electric is 1.02 times more volatile than Siemens AG Class. It trades about 0.02 of its total potential returns per unit of risk. Siemens AG Class is currently generating about 0.17 per unit of volatility. If you would invest  19,690  in Siemens AG Class on December 22, 2024 and sell it today you would earn a total of  5,310  from holding Siemens AG Class or generate 26.97% return on investment over 90 days.

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

Schneider Electric SA  vs.  Siemens AG Class

Schneider Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Schneider Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siemens AG Class

Risk-Adjusted Performance

Good

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

Pair Trading with Schneider Electric and Siemens AG

The main advantage of trading using opposite Schneider Electric and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric 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 Schneider Electric SA 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.