Correlation Between AB Volvo and Talanx AG

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Can any of the company-specific risk be diversified away by investing in both AB Volvo and Talanx AG 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 AB Volvo and Talanx AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB Volvo and Talanx AG, you can compare the effects of market volatilities on AB Volvo and Talanx AG 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 AB Volvo with a short position of Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB Volvo and Talanx AG.

Diversification Opportunities for AB Volvo and Talanx AG

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between VOL1 and Talanx is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AB Volvo and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and AB Volvo 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 AB Volvo are associated (or correlated) with Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of AB Volvo i.e., AB Volvo and Talanx AG go up and down completely randomly.

Pair Corralation between AB Volvo and Talanx AG

Assuming the 90 days trading horizon AB Volvo is expected to generate 2.11 times more return on investment than Talanx AG. However, AB Volvo is 2.11 times more volatile than Talanx AG. It trades about 0.09 of its potential returns per unit of risk. Talanx AG is currently generating about 0.1 per unit of risk. If you would invest  711.00  in AB Volvo on October 5, 2024 and sell it today you would earn a total of  1,613  from holding AB Volvo or generate 226.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AB Volvo  vs.  Talanx AG

 Performance 
       Timeline  
AB Volvo 

Risk-Adjusted Performance

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Strong
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Over the last 90 days AB Volvo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, AB Volvo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Talanx AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

AB Volvo and Talanx AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AB Volvo and Talanx AG

The main advantage of trading using opposite AB Volvo and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Volvo position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.
The idea behind AB Volvo and Talanx AG 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.
Check out your portfolio center.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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