Correlation Between Talanx AG and Wells Fargo

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

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

Diversification Opportunities for Talanx AG and Wells Fargo

-0.03

Correlation Coefficient

Talanx AG  Wells Fargo

Good diversification

The 3 months correlation between Talanx and Wells is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Talanx AG i.e., Talanx AG and Wells Fargo go up and down completely randomly.

Pair Corralation between Talanx AG and Wells Fargo

Assuming the 90 days horizon Talanx AG is expected to generate 1.88 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Talanx AG is 1.3 times less risky than Wells Fargo. It trades about 0.12 of its potential returns per unit of risk. West Fraser Timber is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  8,164  in West Fraser Timber on October 22, 2024 and sell it today you would earn a total of  396.00  from holding West Fraser Timber or generate 4.85% return on investment over 90 days.

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

Talanx AG  vs.  West Fraser Timber

Talanx AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 13 (%) 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.

West Fraser Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Fraser Timber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wells Fargo 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 Wells Fargo

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

The idea behind Talanx AG and West Fraser Timber 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.