Correlation Between Siemens AG and Aalberts

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

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

Diversification Opportunities for Siemens AG and Aalberts

0.68

Correlation Coefficient

Siemens AG  Aalberts

Poor diversification

The 3 months correlation between Siemens and Aalberts is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG ADR and Aalberts NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aalberts NV 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 ADR are associated (or correlated) with Aalberts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aalberts NV has no effect on the direction of Siemens AG i.e., Siemens AG and Aalberts go up and down completely randomly.

Pair Corralation between Siemens AG and Aalberts

Assuming the 90 days horizon Siemens AG ADR is expected to generate 0.89 times more return on investment than Aalberts. However, Siemens AG ADR is 1.12 times less risky than Aalberts. It trades about 0.07 of its potential returns per unit of risk. Aalberts NV is currently generating about 0.01 per unit of risk. If you would invest  5,963  in Siemens AG ADR on February 5, 2024 and sell it today you would earn a total of  1,872  from holding Siemens AG ADR or generate 31.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	37.73%
Values	Daily Returns

Siemens AG ADR  vs.  Aalberts NV

Siemens AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siemens AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Siemens AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aalberts NV

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aalberts NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Aalberts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens AG and Aalberts

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

The idea behind Siemens AG ADR and Aalberts NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..