Correlation Between Siemens AG and Watts Water
Can any of the company-specific risk be diversified away by investing in both Siemens AG and Watts Water 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 Watts Water 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 Watts Water Technologies, you can compare the effects of market volatilities on Siemens AG and Watts Water 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 Watts Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens AG and Watts Water.
Diversification Opportunities for Siemens AG and Watts Water
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Siemens and Watts is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG Class and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies 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 Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of Siemens AG i.e., Siemens AG and Watts Water go up and down completely randomly.
Pair Corralation between Siemens AG and Watts Water
Assuming the 90 days horizon Siemens AG Class is expected to generate 1.51 times more return on investment than Watts Water. However, Siemens AG is 1.51 times more volatile than Watts Water Technologies. It trades about 0.15 of its potential returns per unit of risk. Watts Water Technologies is currently generating about 0.04 per unit of risk. If you would invest 19,398 in Siemens AG Class on December 28, 2024 and sell it today you would earn a total of 4,450 from holding Siemens AG Class or generate 22.94% 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. Watts Water Technologies
Performance |
Timeline |
Siemens AG Class |
Watts Water Technologies |
Siemens AG and Watts Water Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Siemens AG and Watts Water
The main advantage of trading using opposite Siemens AG and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens AG position performs unexpectedly, Watts Water 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 Watts Water will offset losses from the drop in Watts Water's long position.Siemens AG vs. Shapeways Holdings, Common | Siemens AG vs. JE Cleantech Holdings | Siemens AG vs. Greenland Acquisition Corp | Siemens AG vs. Laser Photonics |
Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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