Correlation Between Siemens Aktiengesellscha and GEA GROUP

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

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

Diversification Opportunities for Siemens Aktiengesellscha and GEA GROUP

0.63

Correlation Coefficient

Siemens Aktiengesellscha  GEA GROUP

Poor diversification

The 3 months correlation between Siemens and GEA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Aktiengesellschaft and GEA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEA GROUP and Siemens Aktiengesellscha 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 Aktiengesellschaft are associated (or correlated) with GEA GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEA GROUP has no effect on the direction of Siemens Aktiengesellscha i.e., Siemens Aktiengesellscha and GEA GROUP go up and down completely randomly.

Pair Corralation between Siemens Aktiengesellscha and GEA GROUP

Assuming the 90 days horizon Siemens Aktiengesellschaft is expected to generate 1.34 times more return on investment than GEA GROUP. However, Siemens Aktiengesellscha is 1.34 times more volatile than GEA GROUP. It trades about 0.18 of its potential returns per unit of risk. GEA GROUP is currently generating about 0.19 per unit of risk. If you would invest  16,370  in Siemens Aktiengesellschaft on September 12, 2024 and sell it today you would earn a total of  2,882  from holding Siemens Aktiengesellschaft or generate 17.61% return on investment over 90 days.

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

Siemens Aktiengesellschaft  vs.  GEA GROUP

Siemens Aktiengesellscha

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Siemens Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

GEA GROUP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEA GROUP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, GEA GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Aktiengesellscha and GEA GROUP

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

The idea behind Siemens Aktiengesellschaft and GEA GROUP 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.