Correlation Between Siemens Healthineers and Demant AS

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

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

Diversification Opportunities for Siemens Healthineers and Demant AS

0.45

Correlation Coefficient

Siemens Healthineers  Demant AS

Very weak diversification

The 3 months correlation between Siemens and Demant is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR and Siemens Healthineers 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 Healthineers AG are associated (or correlated) with Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of Siemens Healthineers i.e., Siemens Healthineers and Demant AS go up and down completely randomly.

Pair Corralation between Siemens Healthineers and Demant AS

Assuming the 90 days horizon Siemens Healthineers AG is expected to generate 2.56 times more return on investment than Demant AS. However, Siemens Healthineers is 2.56 times more volatile than Demant AS ADR. It trades about -0.05 of its potential returns per unit of risk. Demant AS ADR is currently generating about -0.28 per unit of risk. If you would invest  2,863  in Siemens Healthineers AG on September 2, 2024 and sell it today you would lose (167.00) from holding Siemens Healthineers AG or give up 5.83% of portfolio value over 90 days.

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

Siemens Healthineers AG  vs.  Demant AS ADR

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. In spite of fairly strong basic indicators, Siemens Healthineers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Demant AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Demant AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Siemens Healthineers and Demant AS

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

The idea behind Siemens Healthineers AG and Demant AS ADR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.