Correlation Between FMC and Talanx AG

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

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

Diversification Opportunities for FMC and Talanx AG

-0.72

Correlation Coefficient

FMC  Talanx AG

Pay attention - limited upside

The 3 months correlation between FMC and Talanx is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and FMC 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 FMC Corporation 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 FMC i.e., FMC and Talanx AG go up and down completely randomly.

Pair Corralation between FMC and Talanx AG

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the Talanx AG. In addition to that, FMC is 1.58 times more volatile than Talanx AG. It trades about -0.16 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.15 per unit of volatility. If you would invest  7,245  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  970.00  from holding Talanx AG or generate 13.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

FMC Corp.  vs.  Talanx AG

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Talanx AG

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Talanx AG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FMC and Talanx AG

The main advantage of trading using opposite FMC and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation 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 Stocks Directory module to find actively traded stocks across global markets.