Correlation Between Siemens AG and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Siemens AG and Eaton PLC 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 Siemens AG and Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Siemens AG Class and Eaton PLC, you can compare the effects of market volatilities on Siemens AG and Eaton PLC 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 Siemens AG with a short position of Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens AG and Eaton PLC.
Diversification Opportunities for Siemens AG and Eaton PLC
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Siemens and Eaton is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG Class and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC and Siemens AG 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 Siemens AG Class are associated (or correlated) with Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of Siemens AG i.e., Siemens AG and Eaton PLC go up and down completely randomly.
Pair Corralation between Siemens AG and Eaton PLC
Assuming the 90 days horizon Siemens AG is expected to generate 2.09 times less return on investment than Eaton PLC. In addition to that, Siemens AG is 1.07 times more volatile than Eaton PLC. It trades about 0.05 of its total potential returns per unit of risk. Eaton PLC is currently generating about 0.11 per unit of volatility. If you would invest 15,876 in Eaton PLC on September 3, 2024 and sell it today you would earn a total of 21,666 from holding Eaton PLC or generate 136.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Siemens AG Class vs. Eaton PLC
Performance |
| Timeline |
| Siemens AG Class |
| Eaton PLC |
Siemens AG and Eaton PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siemens AG and Eaton PLC
The main advantage of trading using opposite Siemens AG and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens AG position performs unexpectedly, Eaton PLC 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.| Siemens AG vs. Shapeways Holdings, Common | Siemens AG vs. JE Cleantech Holdings | Siemens AG vs. Greenland Acquisition Corp | Siemens AG vs. Laser Photonics |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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