Correlation Between Siemens Healthineers and American Water
Can any of the company-specific risk be diversified away by investing in both Siemens Healthineers and American Water 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 American Water 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 American Water Works, you can compare the effects of market volatilities on Siemens Healthineers and American Water 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 American Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Healthineers and American Water.
Diversification Opportunities for Siemens Healthineers and American Water
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Siemens and American is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and American Water Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Water Works 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 American Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Water Works has no effect on the direction of Siemens Healthineers i.e., Siemens Healthineers and American Water go up and down completely randomly.
Pair Corralation between Siemens Healthineers and American Water
Assuming the 90 days horizon Siemens Healthineers is expected to generate 2.61 times less return on investment than American Water. But when comparing it to its historical volatility, Siemens Healthineers AG is 1.51 times less risky than American Water. It trades about 0.05 of its potential returns per unit of risk. American Water Works is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 12,046 in American Water Works on December 21, 2024 and sell it today you would earn a total of 1,169 from holding American Water Works or generate 9.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Siemens Healthineers AG vs. American Water Works
Performance |
Timeline |
Siemens Healthineers |
American Water Works |
Siemens Healthineers and American Water Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Siemens Healthineers and American Water
The main advantage of trading using opposite Siemens Healthineers and American Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Healthineers position performs unexpectedly, American Water 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 American Water will offset losses from the drop in American Water's long position.Siemens Healthineers vs. Nippon Light Metal | Siemens Healthineers vs. FIREWEED METALS P | Siemens Healthineers vs. Daido Steel Co | Siemens Healthineers vs. ADRIATIC METALS LS 013355 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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