Correlation Between Rheinmetall and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Hon Hai 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 Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Hon Hai Precision, you can compare the effects of market volatilities on Rheinmetall and Hon Hai 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 Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Hon Hai.
Diversification Opportunities for Rheinmetall and Hon Hai
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rheinmetall and Hon is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision 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 Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Rheinmetall i.e., Rheinmetall and Hon Hai go up and down completely randomly.
Pair Corralation between Rheinmetall and Hon Hai
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 0.91 times more return on investment than Hon Hai. However, Rheinmetall AG is 1.1 times less risky than Hon Hai. It trades about 0.12 of its potential returns per unit of risk. Hon Hai Precision is currently generating about 0.06 per unit of risk. If you would invest 21,618 in Rheinmetall AG on October 12, 2024 and sell it today you would earn a total of 43,422 from holding Rheinmetall AG or generate 200.86% 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. Hon Hai Precision
Performance |
| Timeline |
| Rheinmetall AG |
| Hon Hai Precision |
Rheinmetall and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Hon Hai
The main advantage of trading using opposite Rheinmetall and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| Rheinmetall vs. SMA Solar Technology | Rheinmetall vs. Learning Technologies Group | Rheinmetall vs. Micron Technology | Rheinmetall vs. Premier Foods PLC |
| Hon Hai vs. Panther Metals PLC | Hon Hai vs. Rheinmetall AG | Hon Hai vs. Various Eateries PLC | Hon Hai vs. Adriatic Metals |
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.
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