Correlation Between SIEMENS AG and Vestas Wind

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

Diversification Opportunities for SIEMENS AG and Vestas Wind

-0.6

Correlation Coefficient

SIEMENS AG  Vestas Wind

Excellent diversification

The 3 months correlation between SIEMENS and Vestas is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS AG SP and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of SIEMENS AG i.e., SIEMENS AG and Vestas Wind go up and down completely randomly.

Pair Corralation between SIEMENS AG and Vestas Wind

Assuming the 90 days trading horizon SIEMENS AG SP is expected to generate 0.55 times more return on investment than Vestas Wind. However, SIEMENS AG SP is 1.83 times less risky than Vestas Wind. It trades about 0.07 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.13 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SIEMENS AG SP  vs.  Vestas Wind Systems

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.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems 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 Vestas Wind

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

The idea behind SIEMENS AG SP and Vestas Wind Systems 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.