Correlation Between Talanx AG and Indutrade

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

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

Diversification Opportunities for Talanx AG and Indutrade

-0.31

Correlation Coefficient

Talanx AG  Indutrade

Very good diversification

The 3 months correlation between Talanx and Indutrade is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Talanx 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 Talanx AG are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Talanx AG i.e., Talanx AG and Indutrade go up and down completely randomly.

Pair Corralation between Talanx AG and Indutrade

Assuming the 90 days horizon Talanx AG is expected to generate 0.79 times more return on investment than Indutrade. However, Talanx AG is 1.26 times less risky than Indutrade. It trades about 0.47 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.09 per unit of risk. If you would invest  7,470  in Talanx AG on September 12, 2024 and sell it today you would earn a total of  930.00  from holding Talanx AG or generate 12.45% return on investment over 90 days.

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

Talanx AG  vs.  Indutrade AB

Talanx AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Talanx AG and Indutrade

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

The idea behind Talanx AG and Indutrade AB 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.