Correlation Between Schneider Electric and Siemens Energy

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

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

Diversification Opportunities for Schneider Electric and Siemens Energy

0.09

Correlation Coefficient

Schneider Electric  Siemens Energy

Significant diversification

The 3 months correlation between Schneider and Siemens is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Schneider Electric SA 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 Schneider Electric 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 Schneider Electric SA 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 Schneider Electric i.e., Schneider Electric and Siemens Energy go up and down completely randomly.

Pair Corralation between Schneider Electric and Siemens Energy

Assuming the 90 days horizon Schneider Electric is expected to generate 13.75 times less return on investment than Siemens Energy. But when comparing it to its historical volatility, Schneider Electric SA is 1.52 times less risky than Siemens Energy. It trades about 0.05 of its potential returns per unit of risk. Siemens Energy AG is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  2,960  in Siemens Energy AG on September 12, 2024 and sell it today you would earn a total of  2,503  from holding Siemens Energy AG or generate 84.56% return on investment over 90 days.

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

Schneider Electric SA  vs.  Siemens Energy AG

Schneider Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider Electric SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Schneider Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siemens Energy AG

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens Energy AG are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Siemens Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schneider Electric and Siemens Energy

The main advantage of trading using opposite Schneider Electric and Siemens Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schneider Electric 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.

The idea behind Schneider Electric SA and Siemens Energy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.