Correlation Between Siemens AG and Rosinbomb

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

Diversification Opportunities for Siemens AG and Rosinbomb

-0.66

Correlation Coefficient

Siemens AG  Rosinbomb

Excellent diversification

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

Pair Corralation between Siemens AG and Rosinbomb

Assuming the 90 days horizon Siemens AG is expected to generate 54.37 times less return on investment than Rosinbomb. But when comparing it to its historical volatility, Siemens AG Class is 8.68 times less risky than Rosinbomb. It trades about 0.02 of its potential returns per unit of risk. Rosinbomb is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Rosinbomb on September 5, 2024 and sell it today you would earn a total of  0.06  from holding Rosinbomb or generate 30.0% return on investment over 90 days.

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

Siemens AG Class  vs.  Rosinbomb

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.

Rosinbomb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rosinbomb has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Siemens AG and Rosinbomb

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

The idea behind Siemens AG Class and Rosinbomb 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.