Correlation Between S A P and Talanx AG

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

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

Diversification Opportunities for S A P and Talanx AG

-0.13

Correlation Coefficient

S A P  Talanx AG

Good diversification

The 3 months correlation between SAP and Talanx is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and S A P 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 SAP SE 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 S A P i.e., S A P and Talanx AG go up and down completely randomly.

Pair Corralation between S A P and Talanx AG

Assuming the 90 days trading horizon SAP SE is expected to generate 0.98 times more return on investment than Talanx AG. However, SAP SE is 1.02 times less risky than Talanx AG. It trades about 0.16 of its potential returns per unit of risk. Talanx AG is currently generating about 0.04 per unit of risk. If you would invest  16,826  in SAP SE on September 1, 2024 and sell it today you would earn a total of  5,664  from holding SAP SE or generate 33.66% return on investment over 90 days.

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

SAP SE  vs.  Talanx AG

SAP SE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Talanx AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Talanx AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with S A P and Talanx AG

The main advantage of trading using opposite S A P and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 SAP SE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.