Correlation Between Innovative Solutions and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Innovative Solutions 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 Innovative Solutions and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovative Solutions and and Rheinmetall AG ADR, you can compare the effects of market volatilities on Innovative Solutions 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 Innovative Solutions with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Solutions and Rheinmetall.
Diversification Opportunities for Innovative Solutions and Rheinmetall
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Innovative and Rheinmetall is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Solutions and and Rheinmetall AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG ADR and Innovative Solutions 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 Innovative Solutions and 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 ADR has no effect on the direction of Innovative Solutions i.e., Innovative Solutions and Rheinmetall go up and down completely randomly.
Pair Corralation between Innovative Solutions and Rheinmetall
Given the investment horizon of 90 days Innovative Solutions is expected to generate 6.02 times less return on investment than Rheinmetall. In addition to that, Innovative Solutions is 1.53 times more volatile than Rheinmetall AG ADR. It trades about 0.02 of its total potential returns per unit of risk. Rheinmetall AG ADR is currently generating about 0.16 per unit of volatility. If you would invest 6,035 in Rheinmetall AG ADR on September 4, 2024 and sell it today you would earn a total of 7,099 from holding Rheinmetall AG ADR or generate 117.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Innovative Solutions and vs. Rheinmetall AG ADR
Performance |
| Timeline |
| Innovative Solutions and |
| Rheinmetall AG ADR |
Innovative Solutions and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovative Solutions and Rheinmetall
The main advantage of trading using opposite Innovative Solutions and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Solutions 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.| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
| Rheinmetall vs. Hensoldt AG | Rheinmetall vs. Heico | Rheinmetall vs. AeroVironment | Rheinmetall vs. Transdigm Group Incorporated |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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