Correlation Between Rheinmetall and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Spotify 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 Spotify 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 Spotify Technology SA, you can compare the effects of market volatilities on Rheinmetall and Spotify 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Spotify Technology.
Diversification Opportunities for Rheinmetall and Spotify Technology
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rheinmetall and Spotify is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Rheinmetall i.e., Rheinmetall and Spotify Technology go up and down completely randomly.
Pair Corralation between Rheinmetall and Spotify Technology
Assuming the 90 days trading horizon Rheinmetall is expected to generate 1.47 times less return on investment than Spotify Technology. But when comparing it to its historical volatility, Rheinmetall AG is 1.28 times less risky than Spotify Technology. It trades about 0.12 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 9,408 in Spotify Technology SA on October 14, 2024 and sell it today you would earn a total of 35,862 from holding Spotify Technology SA or generate 381.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.2% |
| Values | Daily Returns |
Rheinmetall AG vs. Spotify Technology SA
Performance |
| Timeline |
| Rheinmetall AG |
| Spotify Technology |
Rheinmetall and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Spotify Technology
The main advantage of trading using opposite Rheinmetall and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Spotify 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| Rheinmetall vs. Blackrock World Mining | Rheinmetall vs. Intermediate Capital Group | Rheinmetall vs. Atalaya Mining | Rheinmetall vs. AcadeMedia AB |
| Spotify Technology vs. Rheinmetall AG | Spotify Technology vs. Fresenius Medical Care | Spotify Technology vs. Futura Medical | Spotify Technology vs. BE Semiconductor Industries |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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