Correlation Between Kone Oyj and Siemens Energy
Can any of the company-specific risk be diversified away by investing in both Kone Oyj 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 Kone Oyj and Siemens Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kone Oyj ADR and Siemens Energy AG, you can compare the effects of market volatilities on Kone Oyj 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 Kone Oyj with a short position of Siemens Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kone Oyj and Siemens Energy.
Diversification Opportunities for Kone Oyj and Siemens Energy
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kone and Siemens is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kone Oyj ADR 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 Kone Oyj 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 Kone Oyj ADR 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 Kone Oyj i.e., Kone Oyj and Siemens Energy go up and down completely randomly.
Pair Corralation between Kone Oyj and Siemens Energy
Assuming the 90 days horizon Kone Oyj ADR is expected to under-perform the Siemens Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kone Oyj ADR is 1.98 times less risky than Siemens Energy. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Siemens Energy AG is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 4,110 in Siemens Energy AG on August 27, 2024 and sell it today you would earn a total of 1,208 from holding Siemens Energy AG or generate 29.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kone Oyj ADR vs. Siemens Energy AG
Performance |
| Timeline |
| Kone Oyj ADR |
| Siemens Energy AG |
Kone Oyj and Siemens Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kone Oyj and Siemens Energy
The main advantage of trading using opposite Kone Oyj and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kone Oyj 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 Kone Oyj ADR 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.| Siemens Energy vs. Arista Power | Siemens Energy vs. Atlas Copco AB | Siemens Energy vs. American Commerce Solutions |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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