Correlation Between Vestas Wind and SIEMENS AG

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

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

Diversification Opportunities for Vestas Wind and SIEMENS AG

-0.65

Correlation Coefficient

Vestas Wind  SIEMENS AG

Excellent diversification

The 3 months correlation between Vestas and SIEMENS is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and SIEMENS AG SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIEMENS AG SP and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with SIEMENS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIEMENS AG SP has no effect on the direction of Vestas Wind i.e., Vestas Wind and SIEMENS AG go up and down completely randomly.

Pair Corralation between Vestas Wind and SIEMENS AG

Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the SIEMENS AG. In addition to that, Vestas Wind is 1.66 times more volatile than SIEMENS AG SP. It trades about -0.16 of its total potential returns per unit of risk. SIEMENS AG SP is currently generating about 0.08 per unit of volatility. If you would invest  8,250  in SIEMENS AG SP on September 3, 2024 and sell it today you would earn a total of  700.00  from holding SIEMENS AG SP or generate 8.48% return on investment over 90 days.

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

Vestas Wind Systems  vs.  SIEMENS AG SP

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SIEMENS AG SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, SIEMENS AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vestas Wind and SIEMENS AG

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

The idea behind Vestas Wind Systems and SIEMENS AG SP 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.