Correlation Between Talanx AG and Li Ning

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

By analyzing existing cross correlation between Talanx AG and Li Ning Company, you can compare the effects of market volatilities on Talanx AG and Li Ning 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 Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talanx AG and Li Ning.

Diversification Opportunities for Talanx AG and Li Ning

-0.28

Correlation Coefficient

Talanx AG  Li Ning

Very good diversification

The 3 months correlation between Talanx and LNLB is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Talanx AG i.e., Talanx AG and Li Ning go up and down completely randomly.

Pair Corralation between Talanx AG and Li Ning

Assuming the 90 days horizon Talanx AG is expected to generate 6.96 times less return on investment than Li Ning. But when comparing it to its historical volatility, Talanx AG is 3.37 times less risky than Li Ning. It trades about 0.04 of its potential returns per unit of risk. Li Ning Company is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Li Ning Company on September 4, 2024 and sell it today you would earn a total of  29.00  from holding Li Ning Company or generate 17.79% 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.  Li Ning Company

Talanx AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Talanx AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Li Ning Company

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Li Ning reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talanx AG and Li Ning

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

The idea behind Talanx AG and Li Ning Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.