Correlation Between Koninklijke Philips and Siemens Healthineers

Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips and Siemens Healthineers 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 Koninklijke Philips and Siemens Healthineers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Koninklijke Philips NV and Siemens Healthineers AG, you can compare the effects of market volatilities on Koninklijke Philips and Siemens Healthineers 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 Koninklijke Philips with a short position of Siemens Healthineers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Siemens Healthineers.

Diversification Opportunities for Koninklijke Philips and Siemens Healthineers

0.63

Correlation Coefficient

Koninklijke Philips  Siemens Healthineers

Poor diversification

The 3 months correlation between Koninklijke and Siemens is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and Siemens Healthineers AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens Healthineers and Koninklijke Philips 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 Koninklijke Philips NV are associated (or correlated) with Siemens Healthineers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens Healthineers has no effect on the direction of Koninklijke Philips i.e., Koninklijke Philips and Siemens Healthineers go up and down completely randomly.

Pair Corralation between Koninklijke Philips and Siemens Healthineers

Considering the 90-day investment horizon Koninklijke Philips NV is expected to under-perform the Siemens Healthineers. In addition to that, Koninklijke Philips is 1.35 times more volatile than Siemens Healthineers AG. It trades about -0.09 of its total potential returns per unit of risk. Siemens Healthineers AG is currently generating about -0.02 per unit of volatility. If you would invest  5,799  in Siemens Healthineers AG on September 12, 2024 and sell it today you would lose (199.00) from holding Siemens Healthineers AG or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Koninklijke Philips NV  vs.  Siemens Healthineers AG

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Siemens Healthineers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens Healthineers AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Koninklijke Philips and Siemens Healthineers

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

The idea behind Koninklijke Philips NV and Siemens Healthineers 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.