Correlation Between EON SE and Talen Energy
Can any of the company-specific risk be diversified away by investing in both EON SE and Talen Energy 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 EON SE and Talen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EON SE ADR and Talen Energy, you can compare the effects of market volatilities on EON SE and Talen Energy 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 EON SE with a short position of Talen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EON SE and Talen Energy.
Diversification Opportunities for EON SE and Talen Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EON and Talen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EON SE ADR and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy and EON SE 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 EON SE ADR are associated (or correlated) with Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of EON SE i.e., EON SE and Talen Energy go up and down completely randomly.
Pair Corralation between EON SE and Talen Energy
Assuming the 90 days horizon EON SE is expected to generate 190.09 times less return on investment than Talen Energy. But when comparing it to its historical volatility, EON SE ADR is 3.08 times less risky than Talen Energy. It trades about 0.0 of its potential returns per unit of risk. Talen Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,650 in Talen Energy on August 27, 2024 and sell it today you would earn a total of 16,770 from holding Talen Energy or generate 360.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 1.07% |
| Values | Daily Returns |
EON SE ADR vs. Talen Energy
Performance |
| Timeline |
| EON SE ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Talen Energy |
EON SE and Talen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EON SE and Talen Energy
The main advantage of trading using opposite EON SE and Talen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EON SE position performs unexpectedly, Talen Energy 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 Talen Energy will offset losses from the drop in Talen Energy's long position.The idea behind EON SE ADR and Talen Energy 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.| Talen Energy vs. Afya | Talen Energy vs. Relx PLC ADR | Talen Energy vs. 51Talk Online Education | Talen Energy vs. WEBTOON Entertainment Common |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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