Correlation Between S A P and Talanx AG
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and Talanx AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and Talanx AG, you can compare the effects of market volatilities on S A P 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 S A P with a short position of Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Talanx AG.
Diversification Opportunities for S A P and Talanx AG
Very good diversification
The 3 months correlation between SAP and Talanx is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and S A P 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 SAP SE 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 S A P i.e., S A P and Talanx AG go up and down completely randomly.
Pair Corralation between S A P and Talanx AG
Assuming the 90 days horizon SAP SE is expected to generate 0.99 times more return on investment than Talanx AG. However, SAP SE is 1.01 times less risky than Talanx AG. It trades about 0.16 of its potential returns per unit of risk. Talanx AG is currently generating about 0.05 per unit of risk. If you would invest 16,658 in SAP SE on August 29, 2024 and sell it today you would earn a total of 5,392 from holding SAP SE or generate 32.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. Talanx AG
Performance |
| Timeline |
| SAP SE |
| Talanx AG |
S A P and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Talanx AG
The main advantage of trading using opposite S A P and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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.| S A P vs. REINET INVESTMENTS SCA | S A P vs. Boiron SA | S A P vs. BlueScope Steel Limited | S A P vs. AOYAMA TRADING |
| Talanx AG vs. Sabra Health Care | Talanx AG vs. Verizon Communications | Talanx AG vs. Natural Health Trends | Talanx AG vs. Bausch Health Companies |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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