Correlation Between WashTec AG and Sienna Senior

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

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

Diversification Opportunities for WashTec AG and Sienna Senior

-0.06

Correlation Coefficient

WashTec AG  Sienna Senior

Good diversification

The 3 months correlation between WashTec and Sienna is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding WashTec AG and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living and WashTec 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 WashTec AG are associated (or correlated) with Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of WashTec AG i.e., WashTec AG and Sienna Senior go up and down completely randomly.

Pair Corralation between WashTec AG and Sienna Senior

Assuming the 90 days horizon WashTec AG is expected to generate 1.47 times less return on investment than Sienna Senior. But when comparing it to its historical volatility, WashTec AG is 1.82 times less risky than Sienna Senior. It trades about 0.06 of its potential returns per unit of risk. Sienna Senior Living is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Sienna Senior Living on September 3, 2024 and sell it today you would earn a total of  500.00  from holding Sienna Senior Living or generate 70.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.85%
Values	Daily Returns

WashTec AG  vs.  Sienna Senior Living

WashTec AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WashTec AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, WashTec AG reported solid returns over the last few months and may actually be approaching a breakup point.

Sienna Senior Living

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sienna Senior Living are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Sienna Senior may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WashTec AG and Sienna Senior

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

The idea behind WashTec AG and Sienna Senior Living 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.