Correlation Between Siemens AG and Laser Photonics

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

By analyzing existing cross correlation between Siemens AG Class and Laser Photonics, you can compare the effects of market volatilities on Siemens AG and Laser Photonics 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 Laser Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens AG and Laser Photonics.

Diversification Opportunities for Siemens AG and Laser Photonics

0.17

Correlation Coefficient

Siemens AG  Laser Photonics

Average diversification

The 3 months correlation between Siemens and Laser is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG Class and Laser Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laser Photonics 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 Class are associated (or correlated) with Laser Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laser Photonics has no effect on the direction of Siemens AG i.e., Siemens AG and Laser Photonics go up and down completely randomly.

Pair Corralation between Siemens AG and Laser Photonics

Assuming the 90 days horizon Siemens AG is expected to generate 11.65 times less return on investment than Laser Photonics. But when comparing it to its historical volatility, Siemens AG Class is 6.23 times less risky than Laser Photonics. It trades about 0.03 of its potential returns per unit of risk. Laser Photonics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  388.00  in Laser Photonics on August 31, 2024 and sell it today you would earn a total of  171.00  from holding Laser Photonics or generate 44.07% return on investment over 90 days.

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

Siemens AG Class  vs.  Laser Photonics

Siemens AG Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens AG Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Siemens AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Laser Photonics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laser Photonics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Laser Photonics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens AG and Laser Photonics

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

The idea behind Siemens AG Class and Laser Photonics 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.