Correlation Between Talanx AG and AP Møller

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

By analyzing existing cross correlation between Talanx AG and AP Mller , you can compare the effects of market volatilities on Talanx AG and AP Møller 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 AP Møller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talanx AG and AP Møller.

Diversification Opportunities for Talanx AG and AP Møller

0.73

Correlation Coefficient

Talanx AG  AP Møller

Poor diversification

The 3 months correlation between Talanx and DP4B is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Talanx AG i.e., Talanx AG and AP Møller go up and down completely randomly.

Pair Corralation between Talanx AG and AP Møller

Assuming the 90 days horizon Talanx AG is expected to generate 0.35 times more return on investment than AP Møller. However, Talanx AG is 2.85 times less risky than AP Møller. It trades about 0.1 of its potential returns per unit of risk. AP Mller is currently generating about 0.04 per unit of risk. If you would invest  4,159  in Talanx AG on October 4, 2024 and sell it today you would earn a total of  3,966  from holding Talanx AG or generate 95.36% return on investment over 90 days.

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

Talanx AG  vs.  AP Mller

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

AP Møller

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talanx AG and AP Møller

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

The idea behind Talanx AG and AP Mller 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.