Correlation Between Talanx AG and Hormel Foods

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

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

Diversification Opportunities for Talanx AG and Hormel Foods

0.85

Correlation Coefficient

Talanx AG  Hormel Foods

Very poor diversification

The 3 months correlation between Talanx and Hormel is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Talanx AG i.e., Talanx AG and Hormel Foods go up and down completely randomly.

Pair Corralation between Talanx AG and Hormel Foods

Assuming the 90 days horizon Talanx AG is expected to generate 0.91 times more return on investment than Hormel Foods. However, Talanx AG is 1.1 times less risky than Hormel Foods. It trades about 0.08 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.03 per unit of risk. If you would invest  6,312  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  1,813  from holding Talanx AG or generate 28.72% return on investment over 90 days.

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

Talanx AG  vs.  Hormel Foods

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.

Hormel Foods

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Talanx AG and Hormel Foods

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

The idea behind Talanx AG and Hormel Foods 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.