Correlation Between Siemens AG and ABB
Can any of the company-specific risk be diversified away by investing in both Siemens AG and ABB 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 ABB 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 ABB Ltd ADR, you can compare the effects of market volatilities on Siemens AG and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens AG and ABB.
Diversification Opportunities for Siemens AG and ABB
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Siemens and ABB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG ADR and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB Ltd ADR has no effect on the direction of Siemens AG i.e., Siemens AG and ABB go up and down completely randomly.
Pair Corralation between Siemens AG and ABB
If you would invest 3,900 in ABB Ltd ADR on February 24, 2024 and sell it today you would earn a total of 0.00 from holding ABB Ltd ADR or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Siemens AG ADR vs. ABB Ltd ADR
Performance |
Timeline |
Siemens AG ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ABB Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Siemens AG and ABB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Siemens AG and ABB
The main advantage of trading using opposite Siemens AG and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens AG position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.Siemens AG vs. Sandvik AB | Siemens AG vs. Schneider Electric SA | Siemens AG vs. KONE Oyj | Siemens AG vs. Atlas Copco AB |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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