Correlation Between Siemens Energy and Smiths Group
Can any of the company-specific risk be diversified away by investing in both Siemens Energy and Smiths Group 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 Energy and Smiths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Siemens Energy AG and Smiths Group Plc, you can compare the effects of market volatilities on Siemens Energy and Smiths Group 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 Energy with a short position of Smiths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and Smiths Group.
Diversification Opportunities for Siemens Energy and Smiths Group
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Siemens and Smiths is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Smiths Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smiths Group Plc and Siemens Energy 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 Energy AG are associated (or correlated) with Smiths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smiths Group Plc has no effect on the direction of Siemens Energy i.e., Siemens Energy and Smiths Group go up and down completely randomly.
Pair Corralation between Siemens Energy and Smiths Group
Assuming the 90 days horizon Siemens Energy AG is expected to generate 1.17 times more return on investment than Smiths Group. However, Siemens Energy is 1.17 times more volatile than Smiths Group Plc. It trades about 0.34 of its potential returns per unit of risk. Smiths Group Plc is currently generating about 0.24 per unit of risk. If you would invest 4,150 in Siemens Energy AG on August 31, 2024 and sell it today you would earn a total of 1,008 from holding Siemens Energy AG or generate 24.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Siemens Energy AG vs. Smiths Group Plc
Performance |
| Timeline |
| Siemens Energy AG |
| Smiths Group Plc |
Siemens Energy and Smiths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siemens Energy and Smiths Group
The main advantage of trading using opposite Siemens Energy and Smiths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Energy position performs unexpectedly, Smiths Group 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 Smiths Group will offset losses from the drop in Smiths Group's long position.| Siemens Energy vs. Schneider Electric SE | Siemens Energy vs. Vestas Wind Systems | Siemens Energy vs. Hillenbrand | Siemens Energy vs. Generac Holdings |
| Smiths Group vs. Vestas Wind Systems | Smiths Group vs. Nuscale Power Corp | Smiths Group vs. Ballard Power Systems | Smiths Group vs. Rockwell Automation |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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