Correlation Between Talanx AG and LKQ

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

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

Diversification Opportunities for Talanx AG and LKQ

0.61

Correlation Coefficient

Talanx AG  LKQ

Poor diversification

The 3 months correlation between Talanx and LKQ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation 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 LKQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LKQ Corporation has no effect on the direction of Talanx AG i.e., Talanx AG and LKQ go up and down completely randomly.

Pair Corralation between Talanx AG and LKQ

Assuming the 90 days horizon Talanx AG is expected to generate 0.81 times more return on investment than LKQ. However, Talanx AG is 1.24 times less risky than LKQ. It trades about 0.26 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.04 per unit of risk. If you would invest  7,305  in Talanx AG on October 7, 2024 and sell it today you would earn a total of  990.00  from holding Talanx AG or generate 13.55% 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.  LKQ Corp.

Talanx AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

LKQ Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LKQ Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LKQ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Talanx AG and LKQ

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

The idea behind Talanx AG and LKQ Corporation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.