Correlation Between Talanx AG and Arcosa

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

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

Diversification Opportunities for Talanx AG and Arcosa

0.78

Correlation Coefficient

Talanx AG  Arcosa

Poor diversification

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

Pair Corralation between Talanx AG and Arcosa

Assuming the 90 days horizon Talanx AG is expected to generate 0.87 times more return on investment than Arcosa. However, Talanx AG is 1.15 times less risky than Arcosa. It trades about 0.16 of its potential returns per unit of risk. Arcosa Inc is currently generating about 0.11 per unit of risk. If you would invest  7,160  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  965.00  from holding Talanx AG or generate 13.48% 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.  Arcosa Inc

Talanx AG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Arcosa Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Arcosa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Arcosa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Talanx AG and Arcosa

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

The idea behind Talanx AG and Arcosa Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.