Correlation Between Rheinmetall and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Microchip Technology, you can compare the effects of market volatilities on Rheinmetall and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Microchip Technology.
Diversification Opportunities for Rheinmetall and Microchip Technology
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rheinmetall and Microchip is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Rheinmetall i.e., Rheinmetall and Microchip Technology go up and down completely randomly.
Pair Corralation between Rheinmetall and Microchip Technology
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.09 times more return on investment than Microchip Technology. However, Rheinmetall is 1.09 times more volatile than Microchip Technology. It trades about 0.52 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.05 per unit of risk. If you would invest 60,180 in Rheinmetall AG on November 3, 2024 and sell it today you would earn a total of 15,330 from holding Rheinmetall AG or generate 25.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. Microchip Technology
Performance |
| Timeline |
| Rheinmetall AG |
| Microchip Technology |
Rheinmetall and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Microchip Technology
The main advantage of trading using opposite Rheinmetall and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Rheinmetall vs. Samsung Electronics Co | Rheinmetall vs. Samsung Electronics Co | Rheinmetall vs. Toyota Motor Corp | Rheinmetall vs. Reliance Industries Ltd |
| Microchip Technology vs. Anglo Asian Mining | Microchip Technology vs. Spirent Communications plc | Microchip Technology vs. First Majestic Silver | Microchip Technology vs. Zegona Communications 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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