Correlation Between ZTO Express and Siemens AG

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

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

Diversification Opportunities for ZTO Express and Siemens AG

0.27

Correlation Coefficient

ZTO Express  Siemens AG

Modest diversification

The 3 months correlation between ZTO and Siemens is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and Siemens AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG ADR and ZTO Express 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 ZTO Express 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 ADR has no effect on the direction of ZTO Express i.e., ZTO Express and Siemens AG go up and down completely randomly.

Pair Corralation between ZTO Express and Siemens AG

Assuming the 90 days trading horizon ZTO Express is expected to generate 2.34 times less return on investment than Siemens AG. In addition to that, ZTO Express is 1.34 times more volatile than Siemens AG ADR. It trades about 0.01 of its total potential returns per unit of risk. Siemens AG ADR is currently generating about 0.03 per unit of volatility. If you would invest  42.00  in Siemens AG ADR on December 20, 2024 and sell it today you would earn a total of  1.00  from holding Siemens AG ADR or generate 2.38% return on investment over 90 days.

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

ZTO Express  vs.  Siemens AG ADR

ZTO Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ZTO Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Siemens AG ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens AG ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Siemens AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ZTO Express and Siemens AG

The main advantage of trading using opposite ZTO Express and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTO Express 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 ZTO Express and Siemens AG ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .