Correlation Between International Business and Talanx AG
Can any of the company-specific risk be diversified away by investing in both International Business and Talanx AG 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 International Business and Talanx AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Talanx AG, you can compare the effects of market volatilities on International Business and Talanx AG 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 International Business with a short position of Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Talanx AG.
Diversification Opportunities for International Business and Talanx AG
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and Talanx is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and International Business 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 International Business Machines are associated (or correlated) with Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of International Business i.e., International Business and Talanx AG go up and down completely randomly.
Pair Corralation between International Business and Talanx AG
Assuming the 90 days horizon International Business Machines is expected to generate 1.0 times more return on investment than Talanx AG. However, International Business is 1.0 times more volatile than Talanx AG. It trades about 0.19 of its potential returns per unit of risk. Talanx AG is currently generating about 0.05 per unit of risk. If you would invest 14,945 in International Business Machines on August 29, 2024 and sell it today you would earn a total of 6,340 from holding International Business Machines or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Talanx AG
Performance |
| Timeline |
| International Business |
| Talanx AG |
International Business and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Talanx AG
The main advantage of trading using opposite International Business and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.The idea behind International Business Machines and Talanx 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.
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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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