Correlation Between Dow Jones and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Rheinmetall AG, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Rheinmetall.
Diversification Opportunities for Dow Jones and Rheinmetall
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Rheinmetall is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Rheinmetall go up and down completely randomly.
Pair Corralation between Dow Jones and Rheinmetall
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Rheinmetall. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.73 times less risky than Rheinmetall. The index trades about -0.24 of its potential returns per unit of risk. The Rheinmetall AG is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 63,002 in Rheinmetall AG on October 10, 2024 and sell it today you would earn a total of 1,718 from holding Rheinmetall AG or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Dow Jones Industrial vs. Rheinmetall AG
Performance |
| Timeline |
Dow Jones and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Rheinmetall AG
Pair trading matchups for Rheinmetall
Pair Trading with Dow Jones and Rheinmetall
The main advantage of trading using opposite Dow Jones and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Thai Beverage PCL | Dow Jones vs. ServiceNow | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Suntory Beverage Food |
| Rheinmetall vs. Walmart | Rheinmetall vs. BYD Co | Rheinmetall vs. Volkswagen AG | Rheinmetall vs. Volkswagen AG Non Vtg |
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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