Correlation Between SMA Solar and Talanx AG

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

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

Diversification Opportunities for SMA Solar and Talanx AG

-0.1

Correlation Coefficient

SMA Solar  Talanx AG

Good diversification

The 3 months correlation between SMA and Talanx is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Talanx AG go up and down completely randomly.

Pair Corralation between SMA Solar and Talanx AG

Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Talanx AG. In addition to that, SMA Solar is 3.34 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 0.19 per unit of volatility. If you would invest  7,140  in Talanx AG on October 26, 2024 and sell it today you would earn a total of  1,100  from holding Talanx AG or generate 15.41% return on investment over 90 days.

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

SMA Solar Technology  vs.  Talanx AG

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Talanx AG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 14 (%) 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 SMA Solar and Talanx AG

The main advantage of trading using opposite SMA Solar and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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 SMA Solar Technology 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.