Correlation Between Weichai Power and Siemens Energy
Can any of the company-specific risk be diversified away by investing in both Weichai Power and Siemens Energy 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 Weichai Power and Siemens Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weichai Power and Siemens Energy AG, you can compare the effects of market volatilities on Weichai Power and Siemens Energy 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 Weichai Power with a short position of Siemens Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Power and Siemens Energy.
Diversification Opportunities for Weichai Power and Siemens Energy
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Weichai and Siemens is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power and Siemens Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Energy AG and Weichai Power 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 Weichai Power are associated (or correlated) with Siemens Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Energy AG has no effect on the direction of Weichai Power i.e., Weichai Power and Siemens Energy go up and down completely randomly.
Pair Corralation between Weichai Power and Siemens Energy
Assuming the 90 days horizon Weichai Power is expected to generate 3.39 times less return on investment than Siemens Energy. But when comparing it to its historical volatility, Weichai Power is 1.01 times less risky than Siemens Energy. It trades about 0.02 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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 |
Weichai Power vs. Siemens Energy AG
Performance |
| Timeline |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Siemens Energy AG |
Weichai Power and Siemens Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Power and Siemens Energy
The main advantage of trading using opposite Weichai Power and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Power position performs unexpectedly, Siemens Energy 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 Energy will offset losses from the drop in Siemens Energy's long position.| Weichai Power vs. Shanghai Electric Group | Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Nordson | Weichai Power vs. CVD Equipment |
| Siemens Energy vs. SPX Corp | Siemens Energy vs. Nuscale Power Corp | Siemens Energy vs. Vestas Wind Systems | Siemens Energy vs. Nordex SE |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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