Correlation Between Siemens Aktiengesellscha and Deutsche Lufthansa

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

By analyzing existing cross correlation between Siemens Aktiengesellschaft and Deutsche Lufthansa AG, you can compare the effects of market volatilities on Siemens Aktiengesellscha and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Aktiengesellscha and Deutsche Lufthansa.

Diversification Opportunities for Siemens Aktiengesellscha and Deutsche Lufthansa

0.9

Correlation Coefficient

Siemens Aktiengesellscha  Deutsche Lufthansa

Almost no diversification

The 3 months correlation between Siemens and Deutsche is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Aktiengesellschaft and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of Siemens Aktiengesellscha i.e., Siemens Aktiengesellscha and Deutsche Lufthansa go up and down completely randomly.

Pair Corralation between Siemens Aktiengesellscha and Deutsche Lufthansa

Assuming the 90 days horizon Siemens Aktiengesellschaft is expected to generate 0.7 times more return on investment than Deutsche Lufthansa. However, Siemens Aktiengesellschaft is 1.44 times less risky than Deutsche Lufthansa. It trades about 0.14 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about 0.09 per unit of risk. If you would invest  18,504  in Siemens Aktiengesellschaft on December 30, 2024 and sell it today you would earn a total of  2,996  from holding Siemens Aktiengesellschaft or generate 16.19% return on investment over 90 days.

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

Siemens Aktiengesellschaft  vs.  Deutsche Lufthansa AG

Siemens Aktiengesellscha

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Aktiengesellschaft are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Siemens Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Lufthansa

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Lufthansa AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Deutsche Lufthansa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Aktiengesellscha and Deutsche Lufthansa

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

The idea behind Siemens Aktiengesellschaft and Deutsche Lufthansa 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.