Correlation Between Weir Group and Siemens AG
Can any of the company-specific risk be diversified away by investing in both Weir Group and Siemens AG 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 Weir Group and Siemens AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weir Group PLC and Siemens AG Class, you can compare the effects of market volatilities on Weir Group and Siemens AG 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 Weir Group with a short position of Siemens AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weir Group and Siemens AG.
Diversification Opportunities for Weir Group and Siemens AG
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Weir and Siemens is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Weir Group PLC and Siemens AG Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG Class and Weir Group 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 Weir Group PLC are associated (or correlated) with Siemens AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens AG Class has no effect on the direction of Weir Group i.e., Weir Group and Siemens AG go up and down completely randomly.
Pair Corralation between Weir Group and Siemens AG
Assuming the 90 days horizon Weir Group is expected to generate 1.29 times less return on investment than Siemens AG. But when comparing it to its historical volatility, Weir Group PLC is 1.02 times less risky than Siemens AG. It trades about 0.05 of its potential returns per unit of risk. Siemens AG Class is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,326 in Siemens AG Class on January 26, 2024 and sell it today you would earn a total of 7,174 from holding Siemens AG Class or generate 63.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weir Group PLC vs. Siemens AG Class
Performance |
| Timeline |
| Weir Group PLC |
| Siemens AG Class |
Weir Group and Siemens AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weir Group and Siemens AG
The main advantage of trading using opposite Weir Group and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weir Group position performs unexpectedly, Siemens AG 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 AG will offset losses from the drop in Siemens AG's long position.| Weir Group vs. GE Aerospace | Weir Group vs. Eaton PLC | Weir Group vs. Illinois Tool Works | Weir Group vs. Parker Hannifin |
| Siemens AG vs. GE Aerospace | Siemens AG vs. Eaton PLC | Siemens AG vs. Illinois Tool Works | Siemens AG vs. Parker Hannifin |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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