Correlation Between Diversified Energy and Rheinmetall

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Diversified Energy and Rheinmetall 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 Diversified Energy and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Energy and Rheinmetall AG, you can compare the effects of market volatilities on Diversified Energy and Rheinmetall 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 Diversified Energy with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Energy and Rheinmetall.

Diversification Opportunities for Diversified Energy and Rheinmetall

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Diversified and Rheinmetall is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Diversified Energy 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 Diversified Energy are associated (or correlated) with Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of Diversified Energy i.e., Diversified Energy and Rheinmetall go up and down completely randomly.

Pair Corralation between Diversified Energy and Rheinmetall

Assuming the 90 days trading horizon Diversified Energy is expected to generate 1.71 times less return on investment than Rheinmetall. In addition to that, Diversified Energy is 1.22 times more volatile than Rheinmetall AG. It trades about 0.07 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.14 per unit of volatility. If you would invest  32,985  in Rheinmetall AG on October 18, 2024 and sell it today you would earn a total of  32,795  from holding Rheinmetall AG or generate 99.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Diversified Energy  vs.  Rheinmetall AG

 Performance 
       Timeline  
Diversified Energy 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.
Rheinmetall AG 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Rheinmetall unveiled solid returns over the last few months and may actually be approaching a breakup point.

Diversified Energy and Rheinmetall Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Diversified Energy and Rheinmetall

The main advantage of trading using opposite Diversified Energy and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Energy position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall's long position.
The idea behind Diversified Energy and Rheinmetall AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

Other Complementary Tools

Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Money Managers
Screen money managers from public funds and ETFs managed around the world
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Fundamental Analysis
View fundamental data based on most recent published financial statements
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas