Correlation Between Talanx AG and Applied Materials

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

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

Diversification Opportunities for Talanx AG and Applied Materials

-0.46

Correlation Coefficient

Talanx AG  Applied Materials

Very good diversification

The 3 months correlation between Talanx and Applied is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Talanx AG 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 Talanx AG are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Talanx AG i.e., Talanx AG and Applied Materials go up and down completely randomly.

Pair Corralation between Talanx AG and Applied Materials

Assuming the 90 days horizon Talanx AG is expected to generate 50.64 times less return on investment than Applied Materials. But when comparing it to its historical volatility, Talanx AG is 1.54 times less risky than Applied Materials. It trades about 0.01 of its potential returns per unit of risk. Applied Materials is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  15,796  in Applied Materials on October 20, 2024 and sell it today you would earn a total of  2,724  from holding Applied Materials or generate 17.24% return on investment over 90 days.

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

Talanx AG  vs.  Applied Materials

Talanx AG

Risk-Adjusted Performance

6 of 100

Modest

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

Applied Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Applied Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Talanx AG and Applied Materials

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

The idea behind Talanx AG and Applied Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.