Correlation Between Siemens Healthineers and Siemens Energy

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

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

Diversification Opportunities for Siemens Healthineers and Siemens Energy

0.6

Correlation Coefficient

Siemens Healthineers  Siemens Energy

Poor diversification

The 3 months correlation between Siemens and Siemens is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG 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 Siemens Healthineers 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 Siemens Healthineers AG 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 Siemens Healthineers i.e., Siemens Healthineers and Siemens Energy go up and down completely randomly.

Pair Corralation between Siemens Healthineers and Siemens Energy

Assuming the 90 days trading horizon Siemens Healthineers is expected to generate 17.22 times less return on investment than Siemens Energy. But when comparing it to its historical volatility, Siemens Healthineers AG is 2.37 times less risky than Siemens Energy. It trades about 0.01 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,100  in Siemens Energy AG on December 23, 2024 and sell it today you would earn a total of  1,042  from holding Siemens Energy AG or generate 20.43% return on investment over 90 days.

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

Siemens Healthineers AG  vs.  Siemens Energy AG

Siemens Healthineers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Healthineers AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Siemens Energy AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 7 (%) 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 Siemens Healthineers and Siemens Energy

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

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .