Correlation Between SIEMENS AG and Nel ASA

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

Diversification Opportunities for SIEMENS AG and Nel ASA

-0.66

Correlation Coefficient

SIEMENS AG  Nel ASA

Excellent diversification

The 3 months correlation between SIEMENS and Nel is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS AG SP and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of SIEMENS AG i.e., SIEMENS AG and Nel ASA go up and down completely randomly.

Pair Corralation between SIEMENS AG and Nel ASA

Assuming the 90 days trading horizon SIEMENS AG SP is expected to generate 0.43 times more return on investment than Nel ASA. However, SIEMENS AG SP is 2.32 times less risky than Nel ASA. It trades about 0.19 of its potential returns per unit of risk. Nel ASA is currently generating about -0.18 per unit of risk. If you would invest  8,000  in SIEMENS AG SP on September 12, 2024 and sell it today you would earn a total of  1,900  from holding SIEMENS AG SP or generate 23.75% return on investment over 90 days.

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

SIEMENS AG SP  vs.  Nel ASA

SIEMENS AG SP

Risk-Adjusted Performance

15 of 100

Good

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

Nel ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nel ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SIEMENS AG and Nel ASA

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

The idea behind SIEMENS AG SP and Nel ASA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.