Correlation Between Temenos Group and Stadler Rail

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

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

Diversification Opportunities for Temenos Group and Stadler Rail

0.78

Correlation Coefficient

Temenos Group  Stadler Rail

Poor diversification

The 3 months correlation between Temenos and Stadler is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Temenos Group AG and Stadler Rail AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stadler Rail AG and Temenos Group 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 Temenos Group AG are associated (or correlated) with Stadler Rail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stadler Rail AG has no effect on the direction of Temenos Group i.e., Temenos Group and Stadler Rail go up and down completely randomly.

Pair Corralation between Temenos Group and Stadler Rail

Assuming the 90 days trading horizon Temenos Group AG is expected to generate 1.66 times more return on investment than Stadler Rail. However, Temenos Group is 1.66 times more volatile than Stadler Rail AG. It trades about 0.03 of its potential returns per unit of risk. Stadler Rail AG is currently generating about -0.06 per unit of risk. If you would invest  6,354  in Temenos Group AG on December 3, 2024 and sell it today you would earn a total of  1,031  from holding Temenos Group AG or generate 16.23% return on investment over 90 days.

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

Temenos Group AG  vs.  Stadler Rail AG

Temenos Group AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Temenos Group AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Temenos Group showed solid returns over the last few months and may actually be approaching a breakup point.

Stadler Rail AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stadler Rail AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Stadler Rail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Temenos Group and Stadler Rail

The main advantage of trading using opposite Temenos Group and Stadler Rail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Temenos Group position performs unexpectedly, Stadler Rail 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 Stadler Rail will offset losses from the drop in Stadler Rail's long position.

The idea behind Temenos Group AG and Stadler Rail 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.