Correlation Between Talanx AG and Lithia Motors

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

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

Diversification Opportunities for Talanx AG and Lithia Motors

0.0

Correlation Coefficient

Talanx AG  Lithia Motors

Pay attention - limited upside

The 3 months correlation between Talanx and Lithia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors 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 Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of Talanx AG i.e., Talanx AG and Lithia Motors go up and down completely randomly.

Pair Corralation between Talanx AG and Lithia Motors

If you would invest  7,295  in Talanx AG on October 4, 2024 and sell it today you would earn a total of  830.00  from holding Talanx AG or generate 11.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Talanx AG  vs.  Lithia Motors

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.

Lithia Motors

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Talanx AG and Lithia Motors

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

The idea behind Talanx AG and Lithia Motors 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.