Correlation Between Siemens Energy and Weichai Power
Can any of the company-specific risk be diversified away by investing in both Siemens Energy and Weichai Power 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 Weichai Power 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 Weichai Power, you can compare the effects of market volatilities on Siemens Energy and Weichai Power 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 Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and Weichai Power.
Diversification Opportunities for Siemens Energy and Weichai Power
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Siemens and Weichai is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and Weichai Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Power 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 Weichai Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Power has no effect on the direction of Siemens Energy i.e., Siemens Energy and Weichai Power go up and down completely randomly.
Pair Corralation between Siemens Energy and Weichai Power
Assuming the 90 days horizon Siemens Energy AG is expected to generate 1.01 times more return on investment than Weichai Power. However, Siemens Energy is 1.01 times more volatile than Weichai Power. It trades about 0.08 of its potential returns per unit of risk. Weichai Power is currently generating about 0.02 per unit of risk. If you would invest 1,770 in Siemens Energy AG on August 30, 2024 and sell it today you would earn a total of 3,385 from holding Siemens Energy AG or generate 191.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 30.1% |
| Values | Daily Returns |
Siemens Energy AG vs. Weichai Power
Performance |
| Timeline |
| Siemens Energy AG |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Siemens Energy and Weichai Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siemens Energy and Weichai Power
The main advantage of trading using opposite Siemens Energy and Weichai Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Energy position performs unexpectedly, Weichai Power 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 Weichai Power will offset losses from the drop in Weichai Power's long position.| Siemens Energy vs. SPX Corp | Siemens Energy vs. Nuscale Power Corp | Siemens Energy vs. Vestas Wind Systems | Siemens Energy vs. Nordex SE |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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