Correlation Between SIEMENS AG and Atlas Copco

Can any of the company-specific risk be diversified away by investing in both SIEMENS AG and Atlas Copco 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 AG and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SIEMENS AG SP and Atlas Copco A, you can compare the effects of market volatilities on SIEMENS AG and Atlas Copco 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 AG with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIEMENS AG and Atlas Copco.

Diversification Opportunities for SIEMENS AG and Atlas Copco

0.31

Correlation Coefficient

SIEMENS AG  Atlas Copco

Weak diversification

The 3 months correlation between SIEMENS and Atlas is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS AG SP and Atlas Copco A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco A and SIEMENS AG 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 AG SP are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco A has no effect on the direction of SIEMENS AG i.e., SIEMENS AG and Atlas Copco go up and down completely randomly.

Pair Corralation between SIEMENS AG and Atlas Copco

Assuming the 90 days trading horizon SIEMENS AG SP is expected to generate 1.02 times more return on investment than Atlas Copco. However, SIEMENS AG is 1.02 times more volatile than Atlas Copco A. It trades about 0.08 of its potential returns per unit of risk. Atlas Copco A is currently generating about -0.04 per unit of risk. If you would invest  8,250  in SIEMENS AG SP on September 3, 2024 and sell it today you would earn a total of  700.00  from holding SIEMENS AG SP or generate 8.48% return on investment over 90 days.

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

SIEMENS AG SP  vs.  Atlas Copco A

SIEMENS AG SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS AG SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, SIEMENS AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Atlas Copco A

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SIEMENS AG and Atlas Copco

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

The idea behind SIEMENS AG SP and Atlas Copco A 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.