Correlation Between Talanx AG and CECO Environmental

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

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

Diversification Opportunities for Talanx AG and CECO Environmental

0.92

Correlation Coefficient

Talanx AG  CECO Environmental

Almost no diversification

The 3 months correlation between Talanx and CECO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp 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 CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of Talanx AG i.e., Talanx AG and CECO Environmental go up and down completely randomly.

Pair Corralation between Talanx AG and CECO Environmental

Assuming the 90 days horizon Talanx AG is expected to under-perform the CECO Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Talanx AG is 2.09 times less risky than CECO Environmental. The stock trades about -0.08 of its potential returns per unit of risk. The CECO Environmental Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,066  in CECO Environmental Corp on October 11, 2024 and sell it today you would earn a total of  8.00  from holding CECO Environmental Corp or generate 0.26% return on investment over 90 days.

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

Talanx AG  vs.  CECO Environmental Corp

Talanx AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 11 (%) 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.

CECO Environmental Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CECO Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talanx AG and CECO Environmental

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

The idea behind Talanx AG and CECO Environmental Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.