Correlation Between Siemens Healthineers and Lonza Group

Can any of the company-specific risk be diversified away by investing in both Siemens Healthineers and Lonza Group 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 Lonza Group 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 Lonza Group AG, you can compare the effects of market volatilities on Siemens Healthineers and Lonza Group 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 Lonza Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Healthineers and Lonza Group.

Diversification Opportunities for Siemens Healthineers and Lonza Group

0.56

Correlation Coefficient

Siemens Healthineers  Lonza Group

Very weak diversification

The 3 months correlation between Siemens and Lonza is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG 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 Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of Siemens Healthineers i.e., Siemens Healthineers and Lonza Group go up and down completely randomly.

Pair Corralation between Siemens Healthineers and Lonza Group

Assuming the 90 days horizon Siemens Healthineers AG is expected to under-perform the Lonza Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Siemens Healthineers AG is 1.9 times less risky than Lonza Group. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Lonza Group AG is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,371  in Lonza Group AG on January 16, 2024 and sell it today you would earn a total of  434.00  from holding Lonza Group AG or generate 8.08% return on investment over 90 days.

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

Siemens Healthineers AG  vs.  Lonza Group AG

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.

Lonza Group AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Lonza Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens Healthineers and Lonza Group

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

The idea behind Siemens Healthineers AG and Lonza Group AG 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.