Correlation Between Tecnicas Reunidas and Talgo SA

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

By analyzing existing cross correlation between Tecnicas Reunidas and Talgo SA, you can compare the effects of market volatilities on Tecnicas Reunidas and Talgo 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 Tecnicas Reunidas with a short position of Talgo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tecnicas Reunidas and Talgo SA.

Diversification Opportunities for Tecnicas Reunidas and Talgo SA

0.19

Correlation Coefficient

Tecnicas Reunidas  Talgo SA

Average diversification

The 3 months correlation between Tecnicas and Talgo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tecnicas Reunidas and Talgo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talgo SA and Tecnicas Reunidas 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 Tecnicas Reunidas are associated (or correlated) with Talgo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talgo SA has no effect on the direction of Tecnicas Reunidas i.e., Tecnicas Reunidas and Talgo SA go up and down completely randomly.

Pair Corralation between Tecnicas Reunidas and Talgo SA

Assuming the 90 days trading horizon Tecnicas Reunidas is expected to generate 1.0 times more return on investment than Talgo SA. However, Tecnicas Reunidas is 1.0 times less risky than Talgo SA. It trades about 0.28 of its potential returns per unit of risk. Talgo SA is currently generating about 0.01 per unit of risk. If you would invest  1,092  in Tecnicas Reunidas on December 21, 2024 and sell it today you would earn a total of  555.00  from holding Tecnicas Reunidas or generate 50.82% return on investment over 90 days.

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

Tecnicas Reunidas  vs.  Talgo SA

Tecnicas Reunidas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnicas Reunidas are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tecnicas Reunidas exhibited solid returns over the last few months and may actually be approaching a breakup point.

Talgo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Talgo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Talgo SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tecnicas Reunidas and Talgo SA

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

The idea behind Tecnicas Reunidas and Talgo 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.