Correlation Between Talanx AG and Safran SA

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

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

Diversification Opportunities for Talanx AG and Safran SA

0.12

Correlation Coefficient

Talanx AG  Safran SA

Average diversification

The 3 months correlation between Talanx and Safran is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Talanx AG i.e., Talanx AG and Safran SA go up and down completely randomly.

Pair Corralation between Talanx AG and Safran SA

Assuming the 90 days horizon Talanx AG is expected to under-perform the Safran SA. In addition to that, Talanx AG is 1.12 times more volatile than Safran SA. It trades about -0.05 of its total potential returns per unit of risk. Safran SA is currently generating about 0.04 per unit of volatility. If you would invest  21,110  in Safran SA on October 9, 2024 and sell it today you would earn a total of  130.00  from holding Safran SA or generate 0.62% return on investment over 90 days.

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

Talanx AG  vs.  Safran SA

Talanx AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Safran SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Safran SA 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 Safran SA

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

The idea behind Talanx AG and Safran SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.