Correlation Between Siemens Energy and Thyssenkrupp

Can any of the company-specific risk be diversified away by investing in both Siemens Energy and Thyssenkrupp 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 Thyssenkrupp 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 thyssenkrupp AG, you can compare the effects of market volatilities on Siemens Energy and Thyssenkrupp 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 Thyssenkrupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Energy and Thyssenkrupp.

Diversification Opportunities for Siemens Energy and Thyssenkrupp

0.86

Correlation Coefficient

Siemens Energy  Thyssenkrupp

Very poor diversification

The 3 months correlation between Siemens and Thyssenkrupp is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Energy AG and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Siemens Energy i.e., Siemens Energy and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Siemens Energy and Thyssenkrupp

Assuming the 90 days trading horizon Siemens Energy AG is expected to generate 1.5 times more return on investment than Thyssenkrupp. However, Siemens Energy is 1.5 times more volatile than thyssenkrupp AG. It trades about 0.08 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about -0.04 per unit of risk. If you would invest  1,899  in Siemens Energy AG on September 25, 2024 and sell it today you would earn a total of  3,213  from holding Siemens Energy AG or generate 169.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Siemens Energy AG  vs.  thyssenkrupp AG

Siemens Energy AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Siemens Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

thyssenkrupp AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Energy and Thyssenkrupp

The main advantage of trading using opposite Siemens Energy and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Energy position performs unexpectedly, Thyssenkrupp 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 Thyssenkrupp will offset losses from the drop in Thyssenkrupp's long position.

The idea behind Siemens Energy AG and thyssenkrupp AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.