Correlation Between Varta AG and Siemens Energy

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

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

Diversification Opportunities for Varta AG and Siemens Energy

-0.32

Correlation Coefficient

Varta AG  Siemens Energy

Very good diversification

The 3 months correlation between Varta and Siemens is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG and Varta 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 Varta AG are associated (or correlated) with Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of Varta AG i.e., Varta AG and Siemens Energy go up and down completely randomly.

Pair Corralation between Varta AG and Siemens Energy

Assuming the 90 days trading horizon Varta AG is expected to under-perform the Siemens Energy. In addition to that, Varta AG is 1.49 times more volatile than Siemens Energy AG. It trades about -0.41 of its total potential returns per unit of risk. Siemens Energy AG is currently generating about 0.11 per unit of volatility. If you would invest  4,835  in Siemens Energy AG on September 23, 2024 and sell it today you would earn a total of  235.00  from holding Siemens Energy AG or generate 4.86% return on investment over 90 days.

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

Varta AG  vs.  Siemens Energy AG

Varta AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Siemens Energy AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varta AG and Siemens Energy

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

The idea behind Varta AG and Siemens Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.