Correlation Between CHINA TELECOM and Siemens Energy

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

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

Diversification Opportunities for CHINA TELECOM and Siemens Energy

-0.43

Correlation Coefficient

CHINA TELECOM  Siemens Energy

Very good diversification

The 3 months correlation between CHINA and Siemens is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H 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 CHINA TELECOM 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 CHINA TELECOM H 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 CHINA TELECOM i.e., CHINA TELECOM and Siemens Energy go up and down completely randomly.

Pair Corralation between CHINA TELECOM and Siemens Energy

Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 1.03 times more return on investment than Siemens Energy. However, CHINA TELECOM is 1.03 times more volatile than Siemens Energy AG. It trades about 0.09 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.08 per unit of risk. If you would invest  12.00  in CHINA TELECOM H on October 4, 2024 and sell it today you would earn a total of  40.00  from holding CHINA TELECOM H or generate 333.33% return on investment over 90 days.

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

CHINA TELECOM H   vs.  Siemens Energy AG

CHINA TELECOM H

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA TELECOM H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Siemens Energy AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA TELECOM and Siemens Energy

The main advantage of trading using opposite CHINA TELECOM and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TELECOM 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 CHINA TELECOM H 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.