Correlation Between Siemens Healthineers and SIEMENS HEALTH

Can any of the company-specific risk be diversified away by investing in both Siemens Healthineers and SIEMENS HEALTH 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 HEALTH 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 HEALTH ADR050, you can compare the effects of market volatilities on Siemens Healthineers and SIEMENS HEALTH 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 HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Healthineers and SIEMENS HEALTH.

Diversification Opportunities for Siemens Healthineers and SIEMENS HEALTH

0.91

Correlation Coefficient

Siemens Healthineers  SIEMENS HEALTH

Almost no diversification

The 3 months correlation between Siemens and SIEMENS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and SIEMENS HEALTH ADR050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIEMENS HEALTH ADR050 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 HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIEMENS HEALTH ADR050 has no effect on the direction of Siemens Healthineers i.e., Siemens Healthineers and SIEMENS HEALTH go up and down completely randomly.

Pair Corralation between Siemens Healthineers and SIEMENS HEALTH

Assuming the 90 days horizon Siemens Healthineers AG is expected to generate 1.01 times more return on investment than SIEMENS HEALTH. However, Siemens Healthineers is 1.01 times more volatile than SIEMENS HEALTH ADR050. It trades about -0.19 of its potential returns per unit of risk. SIEMENS HEALTH ADR050 is currently generating about -0.22 per unit of risk. If you would invest  5,552  in Siemens Healthineers AG on December 21, 2024 and sell it today you would lose (290.00) from holding Siemens Healthineers AG or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Siemens Healthineers AG  vs.  SIEMENS HEALTH ADR050

Siemens Healthineers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Healthineers AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SIEMENS HEALTH ADR050

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS HEALTH ADR050 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, SIEMENS HEALTH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Siemens Healthineers and SIEMENS HEALTH

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

The idea behind Siemens Healthineers AG and SIEMENS HEALTH ADR050 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.