Correlation Between Food Life and Talanx AG

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

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

Diversification Opportunities for Food Life and Talanx AG

0.71

Correlation Coefficient

Food Life  Talanx AG

Poor diversification

The 3 months correlation between Food and Talanx is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and Food Life 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 Food Life Companies 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 Food Life i.e., Food Life and Talanx AG go up and down completely randomly.

Pair Corralation between Food Life and Talanx AG

Assuming the 90 days horizon Food Life Companies is expected to generate 2.21 times more return on investment than Talanx AG. However, Food Life is 2.21 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 0.22 per unit of risk. If you would invest  2,000  in Food Life Companies on December 28, 2024 and sell it today you would earn a total of  760.00  from holding Food Life Companies or generate 38.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Food Life Companies  vs.  Talanx AG

Food Life Companies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Talanx AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Food Life and Talanx AG

The main advantage of trading using opposite Food Life and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life 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 Food Life Companies 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.