Correlation Between Talanx AG and Teradyne

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

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

Diversification Opportunities for Talanx AG and Teradyne

0.62

Correlation Coefficient

Talanx AG  Teradyne

Poor diversification

The 3 months correlation between Talanx and Teradyne is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Talanx AG and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Talanx AG i.e., Talanx AG and Teradyne go up and down completely randomly.

Pair Corralation between Talanx AG and Teradyne

Assuming the 90 days horizon Talanx AG is expected to generate 3.52 times less return on investment than Teradyne. But when comparing it to its historical volatility, Talanx AG is 1.95 times less risky than Teradyne. It trades about 0.08 of its potential returns per unit of risk. Teradyne is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,349  in Teradyne on February 21, 2024 and sell it today you would earn a total of  4,437  from holding Teradyne or generate 53.14% 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.  Teradyne

Talanx AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Talanx AG are ranked lower than 9 (%) 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.

Teradyne

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teradyne reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talanx AG and Teradyne

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

The idea behind Talanx AG and Teradyne 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.