Correlation Between American Pwr and Siemens AG
Can any of the company-specific risk be diversified away by investing in both American Pwr 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 American Pwr and Siemens AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Pwr Group and Siemens AG Class, you can compare the effects of market volatilities on American Pwr 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 American Pwr with a short position of Siemens AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Pwr and Siemens AG.
Diversification Opportunities for American Pwr and Siemens AG
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Siemens is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Pwr Group and Siemens AG Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG Class and American Pwr 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 American Pwr Group 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 Class has no effect on the direction of American Pwr i.e., American Pwr and Siemens AG go up and down completely randomly.
Pair Corralation between American Pwr and Siemens AG
Given the investment horizon of 90 days American Pwr Group is expected to generate 7.34 times more return on investment than Siemens AG. However, American Pwr is 7.34 times more volatile than Siemens AG Class. It trades about 0.06 of its potential returns per unit of risk. Siemens AG Class is currently generating about 0.05 per unit of risk. If you would invest 1.90 in American Pwr Group on August 28, 2024 and sell it today you would lose (0.40) from holding American Pwr Group or give up 21.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Pwr Group vs. Siemens AG Class
Performance |
| Timeline |
| American Pwr Group |
| Siemens AG Class |
American Pwr and Siemens AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Pwr and Siemens AG
The main advantage of trading using opposite American Pwr and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Pwr 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.| American Pwr vs. Element Solutions | American Pwr vs. Orion Engineered Carbons | American Pwr vs. Minerals Technologies | American Pwr vs. Ingevity Corp |
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Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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