Correlation Between Talanx AG and Microchip Technology

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

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

Diversification Opportunities for Talanx AG and Microchip Technology

-0.82

Correlation Coefficient

Talanx AG  Microchip Technology

Pay attention - limited upside

The 3 months correlation between Talanx and Microchip is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Talanx AG i.e., Talanx AG and Microchip Technology go up and down completely randomly.

Pair Corralation between Talanx AG and Microchip Technology

Assuming the 90 days horizon Talanx AG is expected to generate 0.55 times more return on investment than Microchip Technology. However, Talanx AG is 1.82 times less risky than Microchip Technology. It trades about 0.08 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.12 per unit of risk. If you would invest  7,590  in Talanx AG on October 20, 2024 and sell it today you would earn a total of  520.00  from holding Talanx AG or generate 6.85% return on investment over 90 days.

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

Talanx AG  vs.  Microchip Technology Incorpora

Talanx AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 6 (%) 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.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Talanx AG and Microchip Technology

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

The idea behind Talanx AG and Microchip Technology Incorporated 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.