Correlation Between Rheinmetall and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Aeorema Communications 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 Aeorema Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Aeorema Communications Plc, you can compare the effects of market volatilities on Rheinmetall and Aeorema Communications 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 Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Aeorema Communications.
Diversification Opportunities for Rheinmetall and Aeorema Communications
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rheinmetall and Aeorema is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Rheinmetall i.e., Rheinmetall and Aeorema Communications go up and down completely randomly.
Pair Corralation between Rheinmetall and Aeorema Communications
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 0.92 times more return on investment than Aeorema Communications. However, Rheinmetall AG is 1.09 times less risky than Aeorema Communications. It trades about 0.12 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.39 per unit of risk. If you would invest 62,665 in Rheinmetall AG on October 15, 2024 and sell it today you would earn a total of 2,375 from holding Rheinmetall AG or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. Aeorema Communications Plc
Performance |
| Timeline |
| Rheinmetall AG |
| Aeorema Communications |
Rheinmetall and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Aeorema Communications
The main advantage of trading using opposite Rheinmetall and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.| Rheinmetall vs. Walmart | Rheinmetall vs. BYD Co | Rheinmetall vs. Volkswagen AG | Rheinmetall vs. Volkswagen AG Non Vtg |
| Aeorema Communications vs. Norwegian Air Shuttle | Aeorema Communications vs. Alien Metals | Aeorema Communications vs. Rheinmetall AG | Aeorema Communications vs. Lundin Mining Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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