Correlation Between Siemens Energy and Generac Holdings
Can any of the company-specific risk be diversified away by investing in both Siemens Energy and Generac Holdings 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 Generac Holdings 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 Generac Holdings, you can compare the effects of market volatilities on Siemens Energy and Generac Holdings 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 Generac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and Generac Holdings.
Diversification Opportunities for Siemens Energy and Generac Holdings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Siemens and Generac is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings 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 Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Siemens Energy i.e., Siemens Energy and Generac Holdings go up and down completely randomly.
Pair Corralation between Siemens Energy and Generac Holdings
Assuming the 90 days horizon Siemens Energy AG is expected to generate 1.11 times more return on investment than Generac Holdings. However, Siemens Energy is 1.11 times more volatile than Generac Holdings. It trades about 0.56 of its potential returns per unit of risk. Generac Holdings is currently generating about 0.3 per unit of risk. If you would invest 4,083 in Siemens Energy AG on September 1, 2024 and sell it today you would earn a total of 1,317 from holding Siemens Energy AG or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Siemens Energy AG vs. Generac Holdings
Performance |
| Timeline |
| Siemens Energy AG |
| Generac Holdings |
Siemens Energy and Generac Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siemens Energy and Generac Holdings
The main advantage of trading using opposite Siemens Energy and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Energy position performs unexpectedly, Generac Holdings 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 Generac Holdings will offset losses from the drop in Generac Holdings' long position.| Siemens Energy vs. SPX Corp | Siemens Energy vs. Nuscale Power Corp | Siemens Energy vs. Vestas Wind Systems | Siemens Energy vs. Nordex SE |
| Generac Holdings vs. Emerson Electric | Generac Holdings vs. Eaton PLC | Generac Holdings vs. Parker Hannifin | Generac Holdings vs. Illinois Tool Works |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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