Correlation Between SIEMENS AG and ENGIE Eps

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

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

Diversification Opportunities for SIEMENS AG and ENGIE Eps

0.33

Correlation Coefficient

SIEMENS AG  ENGIE Eps

Weak diversification

The 3 months correlation between SIEMENS and ENGIE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS AG SP and ENGIE Eps SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE Eps SA and SIEMENS AG 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 AG SP are associated (or correlated) with ENGIE Eps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE Eps SA has no effect on the direction of SIEMENS AG i.e., SIEMENS AG and ENGIE Eps go up and down completely randomly.

Pair Corralation between SIEMENS AG and ENGIE Eps

Assuming the 90 days trading horizon SIEMENS AG SP is expected to generate 4.25 times more return on investment than ENGIE Eps. However, SIEMENS AG is 4.25 times more volatile than ENGIE Eps SA. It trades about 0.07 of its potential returns per unit of risk. ENGIE Eps SA is currently generating about -0.04 per unit of risk. If you would invest  8,850  in SIEMENS AG SP on September 27, 2024 and sell it today you would earn a total of  500.00  from holding SIEMENS AG SP or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.57%
Values	Daily Returns

SIEMENS AG SP  vs.  ENGIE Eps SA

SIEMENS AG SP

Risk-Adjusted Performance

3 of 100

Insignificant

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

ENGIE Eps SA

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ENGIE Eps SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ENGIE Eps reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIEMENS AG and ENGIE Eps

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

The idea behind SIEMENS AG SP and ENGIE Eps SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.