Correlation Between Sandvik AB and Siemens AG
Can any of the company-specific risk be diversified away by investing in both Sandvik AB 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 Sandvik AB and Siemens AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB ADR and Siemens AG Class, you can compare the effects of market volatilities on Sandvik AB 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 Sandvik AB with a short position of Siemens AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Siemens AG.
Diversification Opportunities for Sandvik AB and Siemens AG
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sandvik and Siemens is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB ADR 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 Sandvik AB 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 Sandvik AB ADR 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 Sandvik AB i.e., Sandvik AB and Siemens AG go up and down completely randomly.
Pair Corralation between Sandvik AB and Siemens AG
Assuming the 90 days horizon Sandvik AB ADR is expected to under-perform the Siemens AG. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sandvik AB ADR is 1.21 times less risky than Siemens AG. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Siemens AG Class is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 18,168 in Siemens AG Class on August 25, 2024 and sell it today you would earn a total of 232.00 from holding Siemens AG Class or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB ADR vs. Siemens AG Class
Performance |
| Timeline |
| Sandvik AB ADR |
| Siemens AG Class |
Sandvik AB and Siemens AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Siemens AG
The main advantage of trading using opposite Sandvik AB and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB 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.| Sandvik AB vs. Rockwell Automation | Sandvik AB vs. Schneider Electric SA | Sandvik AB vs. Fanuc | Sandvik AB vs. Vestas Wind Systems |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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