Correlation Between KOMATSU and Talanx AG

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

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

Diversification Opportunities for KOMATSU and Talanx AG

0.76

Correlation Coefficient

KOMATSU  Talanx AG

Poor diversification

The 3 months correlation between KOMATSU and Talanx is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding KOMATSU LTD SPONS and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and KOMATSU 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 KOMATSU LTD SPONS 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 KOMATSU i.e., KOMATSU and Talanx AG go up and down completely randomly.

Pair Corralation between KOMATSU and Talanx AG

Assuming the 90 days trading horizon KOMATSU is expected to generate 1.53 times less return on investment than Talanx AG. In addition to that, KOMATSU is 1.37 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 0.08 per unit of volatility. If you would invest  6,312  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  1,813  from holding Talanx AG or generate 28.72% return on investment over 90 days.

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

KOMATSU LTD SPONS  vs.  Talanx AG

KOMATSU LTD SPONS

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days KOMATSU LTD SPONS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, KOMATSU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Talanx AG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. 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 KOMATSU and Talanx AG

The main advantage of trading using opposite KOMATSU and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOMATSU 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 KOMATSU LTD SPONS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.