Correlation Between Siemens Healthineers and Sonova Holding

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

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

Diversification Opportunities for Siemens Healthineers and Sonova Holding

0.34

Correlation Coefficient

Siemens Healthineers  Sonova Holding

Weak diversification

The 3 months correlation between Siemens and Sonova is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and Sonova Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonova Holding AG and Siemens Healthineers 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 Healthineers AG are associated (or correlated) with Sonova Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonova Holding AG has no effect on the direction of Siemens Healthineers i.e., Siemens Healthineers and Sonova Holding go up and down completely randomly.

Pair Corralation between Siemens Healthineers and Sonova Holding

Assuming the 90 days horizon Siemens Healthineers AG is expected to generate 0.99 times more return on investment than Sonova Holding. However, Siemens Healthineers AG is 1.01 times less risky than Sonova Holding. It trades about 0.0 of its potential returns per unit of risk. Sonova Holding AG is currently generating about -0.06 per unit of risk. If you would invest  2,768  in Siemens Healthineers AG on September 12, 2024 and sell it today you would lose (12.00) from holding Siemens Healthineers AG or give up 0.43% of portfolio value over 90 days.

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

Siemens Healthineers AG  vs.  Sonova Holding AG

Siemens Healthineers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens Healthineers AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sonova Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonova Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sonova Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Siemens Healthineers and Sonova Holding

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

The idea behind Siemens Healthineers AG and Sonova Holding AG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.