Correlation Between SIEMENS AG and SFC Energy

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

Diversification Opportunities for SIEMENS AG and SFC Energy

0.71

Correlation Coefficient

SIEMENS AG  SFC Energy

Poor diversification

The 3 months correlation between SIEMENS and SFC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS AG SP and SFC Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFC Energy AG 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 SFC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFC Energy AG has no effect on the direction of SIEMENS AG i.e., SIEMENS AG and SFC Energy go up and down completely randomly.

Pair Corralation between SIEMENS AG and SFC Energy

Assuming the 90 days trading horizon SIEMENS AG is expected to generate 1.9 times less return on investment than SFC Energy. But when comparing it to its historical volatility, SIEMENS AG SP is 1.38 times less risky than SFC Energy. It trades about 0.1 of its potential returns per unit of risk. SFC Energy AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,732  in SFC Energy AG on December 30, 2024 and sell it today you would earn a total of  493.00  from holding SFC Energy AG or generate 28.46% return on investment over 90 days.

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

SIEMENS AG SP  vs.  SFC Energy AG

SIEMENS AG SP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 7 (%) 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.

SFC Energy AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SFC Energy AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, SFC Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIEMENS AG and SFC Energy

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

The idea behind SIEMENS AG SP and SFC Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.