Correlation Between Federal Home and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Federal Home 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 Federal Home and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home Loan and Rheinmetall AG, you can compare the effects of market volatilities on Federal Home 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 Federal Home with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Rheinmetall.
Diversification Opportunities for Federal Home and Rheinmetall
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federal and Rheinmetall is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Federal Home 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 Federal Home Loan 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 Federal Home i.e., Federal Home and Rheinmetall go up and down completely randomly.
Pair Corralation between Federal Home and Rheinmetall
Assuming the 90 days horizon Federal Home Loan is expected to generate 4.89 times more return on investment than Rheinmetall. However, Federal Home is 4.89 times more volatile than Rheinmetall AG. It trades about 0.53 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.67 per unit of risk. If you would invest 110.00 in Federal Home Loan on September 3, 2024 and sell it today you would earn a total of 188.00 from holding Federal Home Loan or generate 170.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home Loan vs. Rheinmetall AG
Performance |
| Timeline |
| Federal Home Loan |
| Rheinmetall AG |
Federal Home and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Rheinmetall
The main advantage of trading using opposite Federal Home and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home 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.| Federal Home vs. Cardinal Health | Federal Home vs. Waste Management | Federal Home vs. DOCDATA | Federal Home vs. EPSILON HEALTHCARE LTD |
| Rheinmetall vs. VIVA WINE GROUP | Rheinmetall vs. Compugroup Medical SE | Rheinmetall vs. Apollo Medical Holdings | Rheinmetall vs. VIRGIN WINES UK |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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