Correlation Between Siemens and Diamond Power

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

By analyzing existing cross correlation between Siemens Limited and Diamond Power Infrastructure, you can compare the effects of market volatilities on Siemens and Diamond Power 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 with a short position of Diamond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens and Diamond Power.

Diversification Opportunities for Siemens and Diamond Power

-0.15

Correlation Coefficient

Siemens  Diamond Power

Good diversification

The 3 months correlation between Siemens and Diamond is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Limited and Diamond Power Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Power Infras and Siemens 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 Limited are associated (or correlated) with Diamond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Power Infras has no effect on the direction of Siemens i.e., Siemens and Diamond Power go up and down completely randomly.

Pair Corralation between Siemens and Diamond Power

Assuming the 90 days trading horizon Siemens Limited is expected to under-perform the Diamond Power. But the stock apears to be less risky and, when comparing its historical volatility, Siemens Limited is 55.72 times less risky than Diamond Power. The stock trades about -0.11 of its potential returns per unit of risk. The Diamond Power Infrastructure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,355  in Diamond Power Infrastructure on October 10, 2024 and sell it today you would earn a total of  454.00  from holding Diamond Power Infrastructure or generate 3.16% return on investment over 90 days.

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

Siemens Limited  vs.  Diamond Power Infrastructure

Siemens Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Diamond Power Infras

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Power Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens and Diamond Power

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

The idea behind Siemens Limited and Diamond Power Infrastructure 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.