Correlation Between SIEMENS ENERGY and Pampa Energa

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

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

Diversification Opportunities for SIEMENS ENERGY and Pampa Energa

0.75

Correlation Coefficient

SIEMENS ENERGY  Pampa Energa

Poor diversification

The 3 months correlation between SIEMENS and Pampa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SIEMENS ENERGY AG and Pampa Energa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energa SA and SIEMENS ENERGY 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 ENERGY AG are associated (or correlated) with Pampa Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energa SA has no effect on the direction of SIEMENS ENERGY i.e., SIEMENS ENERGY and Pampa Energa go up and down completely randomly.

Pair Corralation between SIEMENS ENERGY and Pampa Energa

Assuming the 90 days trading horizon SIEMENS ENERGY AG is expected to generate 1.13 times more return on investment than Pampa Energa. However, SIEMENS ENERGY is 1.13 times more volatile than Pampa Energa SA. It trades about 0.31 of its potential returns per unit of risk. Pampa Energa SA is currently generating about 0.06 per unit of risk. If you would invest  1,380  in SIEMENS ENERGY AG on March 3, 2024 and sell it today you would earn a total of  1,200  from holding SIEMENS ENERGY AG or generate 86.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

SIEMENS ENERGY AG  vs.  Pampa Energa SA

SIEMENS ENERGY AG

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SIEMENS ENERGY AG are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIEMENS ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pampa Energa SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energa SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pampa Energa may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with SIEMENS ENERGY and Pampa Energa

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

The idea behind SIEMENS ENERGY AG and Pampa Energa SA 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..