Correlation Between Siemens AG and Kawasaki Heavy

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

By analyzing existing cross correlation between Siemens AG Class and Kawasaki Heavy Industries, you can compare the effects of market volatilities on Siemens AG and Kawasaki Heavy 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 Kawasaki Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens AG and Kawasaki Heavy.

Diversification Opportunities for Siemens AG and Kawasaki Heavy

0.72

Correlation Coefficient

Siemens AG  Kawasaki Heavy

Poor diversification

The 3 months correlation between Siemens and Kawasaki is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG Class and Kawasaki Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Heavy Industries 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 Class are associated (or correlated) with Kawasaki Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Heavy Industries has no effect on the direction of Siemens AG i.e., Siemens AG and Kawasaki Heavy go up and down completely randomly.

Pair Corralation between Siemens AG and Kawasaki Heavy

Assuming the 90 days horizon Siemens AG is expected to generate 1.82 times less return on investment than Kawasaki Heavy. But when comparing it to its historical volatility, Siemens AG Class is 1.63 times less risky than Kawasaki Heavy. It trades about 0.08 of its potential returns per unit of risk. Kawasaki Heavy Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,364  in Kawasaki Heavy Industries on September 5, 2024 and sell it today you would earn a total of  238.00  from holding Kawasaki Heavy Industries or generate 17.45% return on investment over 90 days.

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

Siemens AG Class  vs.  Kawasaki Heavy Industries

Siemens AG Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens AG Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Siemens AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kawasaki Heavy Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasaki Heavy Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Kawasaki Heavy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens AG and Kawasaki Heavy

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

The idea behind Siemens AG Class and Kawasaki Heavy Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.