Correlation Between KCE EL and Talanx AG

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

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

Diversification Opportunities for KCE EL and Talanx AG

-0.8

Correlation Coefficient

KCE EL  Talanx AG

Pay attention - limited upside

The 3 months correlation between KCE and Talanx is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding KCE EL PCL and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and KCE EL 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 KCE EL PCL 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 KCE EL i.e., KCE EL and Talanx AG go up and down completely randomly.

Pair Corralation between KCE EL and Talanx AG

Assuming the 90 days trading horizon KCE EL PCL is expected to under-perform the Talanx AG. In addition to that, KCE EL is 1.81 times more volatile than Talanx AG. It trades about -0.06 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.06 per unit of volatility. If you would invest  6,297  in Talanx AG on October 4, 2024 and sell it today you would earn a total of  1,828  from holding Talanx AG or generate 29.03% return on investment over 90 days.

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

KCE EL PCL  vs.  Talanx AG

KCE EL PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCE EL PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 unsteady basic indicators, Talanx AG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KCE EL and Talanx AG

The main advantage of trading using opposite KCE EL and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCE EL 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 KCE EL PCL 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.