Correlation Between Talanx AG and Smurfit Kappa

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

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

Diversification Opportunities for Talanx AG and Smurfit Kappa

0.68

Correlation Coefficient

Talanx AG  Smurfit Kappa

Poor diversification

The 3 months correlation between Talanx and Smurfit is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Smurfit Kappa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit Kappa Group 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 Smurfit Kappa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit Kappa Group has no effect on the direction of Talanx AG i.e., Talanx AG and Smurfit Kappa go up and down completely randomly.

Pair Corralation between Talanx AG and Smurfit Kappa

Assuming the 90 days horizon Talanx AG is expected to generate 1.26 times less return on investment than Smurfit Kappa. But when comparing it to its historical volatility, Talanx AG is 1.79 times less risky than Smurfit Kappa. It trades about 0.07 of its potential returns per unit of risk. Smurfit Kappa Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,350  in Smurfit Kappa Group on October 9, 2024 and sell it today you would earn a total of  830.00  from holding Smurfit Kappa Group or generate 19.08% 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.  Smurfit Kappa Group

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 fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Smurfit Kappa Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talanx AG and Smurfit Kappa

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

The idea behind Talanx AG and Smurfit Kappa Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.