Correlation Between China Railway and Talanx AG

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

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

Diversification Opportunities for China Railway and Talanx AG

-0.16

Correlation Coefficient

China Railway  Talanx AG

Good diversification

The 3 months correlation between China and Talanx is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Group and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and China Railway 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 China Railway Group 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 China Railway i.e., China Railway and Talanx AG go up and down completely randomly.

Pair Corralation between China Railway and Talanx AG

Assuming the 90 days horizon China Railway Group is expected to under-perform the Talanx AG. In addition to that, China Railway is 1.8 times more volatile than Talanx AG. It trades about -0.04 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.47 per unit of volatility. If you would invest  7,470  in Talanx AG on September 12, 2024 and sell it today you would earn a total of  930.00  from holding Talanx AG or generate 12.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Railway Group  vs.  Talanx AG

China Railway Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Talanx AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Railway and Talanx AG

The main advantage of trading using opposite China Railway and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway 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 China Railway Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.