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
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Rheinmetall is 0.52. 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 is expected to generate 4.16 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Dow Jones Industrial is 3.79 times less risky than Rheinmetall. It trades about 0.12 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 30,228 in Rheinmetall AG on September 4, 2024 and sell it today you would earn a total of 35,672 from holding Rheinmetall AG or generate 118.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.38% |
| 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. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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