Correlation Between Rheinmetall and Leroy Seafood
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Leroy Seafood 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 Rheinmetall and Leroy Seafood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Leroy Seafood Group, you can compare the effects of market volatilities on Rheinmetall and Leroy Seafood 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 Rheinmetall with a short position of Leroy Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Leroy Seafood.
Diversification Opportunities for Rheinmetall and Leroy Seafood
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and Leroy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Leroy Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leroy Seafood Group and Rheinmetall 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 Rheinmetall AG are associated (or correlated) with Leroy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leroy Seafood Group has no effect on the direction of Rheinmetall i.e., Rheinmetall and Leroy Seafood go up and down completely randomly.
Pair Corralation between Rheinmetall and Leroy Seafood
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.04 times more return on investment than Leroy Seafood. However, Rheinmetall is 1.04 times more volatile than Leroy Seafood Group. It trades about 0.13 of its potential returns per unit of risk. Leroy Seafood Group is currently generating about 0.02 per unit of risk. If you would invest 23,321 in Rheinmetall AG on November 6, 2024 and sell it today you would earn a total of 52,189 from holding Rheinmetall AG or generate 223.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. Leroy Seafood Group
Performance |
| Timeline |
| Rheinmetall AG |
| Leroy Seafood Group |
Rheinmetall and Leroy Seafood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Leroy Seafood
The main advantage of trading using opposite Rheinmetall and Leroy Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Leroy Seafood 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 Leroy Seafood will offset losses from the drop in Leroy Seafood's long position.| Rheinmetall vs. DFS Furniture PLC | Rheinmetall vs. Home Depot | Rheinmetall vs. bet at home AG | Rheinmetall vs. Induction Healthcare Group |
| Leroy Seafood vs. International Consolidated Airlines | Leroy Seafood vs. Pan American Silver | Leroy Seafood vs. McEwen Mining | Leroy Seafood vs. GlobalData PLC |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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