Correlation Between Siemens Energy and Dear Cashmere

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

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

Diversification Opportunities for Siemens Energy and Dear Cashmere

0.41

Correlation Coefficient

Siemens Energy  Dear Cashmere

Very weak diversification

The 3 months correlation between Siemens and Dear is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Dear Cashmere Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dear Cashmere Holding and Siemens Energy 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 Energy AG are associated (or correlated) with Dear Cashmere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dear Cashmere Holding has no effect on the direction of Siemens Energy i.e., Siemens Energy and Dear Cashmere go up and down completely randomly.

Pair Corralation between Siemens Energy and Dear Cashmere

Assuming the 90 days horizon Siemens Energy is expected to generate 1.09 times less return on investment than Dear Cashmere. But when comparing it to its historical volatility, Siemens Energy AG is 5.69 times less risky than Dear Cashmere. It trades about 0.42 of its potential returns per unit of risk. Dear Cashmere Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Dear Cashmere Holding on September 5, 2024 and sell it today you would earn a total of  1.00  from holding Dear Cashmere Holding or generate 6.67% return on investment over 90 days.

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

Siemens Energy AG  vs.  Dear Cashmere Holding

Siemens Energy AG

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Siemens Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Dear Cashmere Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dear Cashmere Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Dear Cashmere reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Energy and Dear Cashmere

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

The idea behind Siemens Energy AG and Dear Cashmere Holding 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.