Correlation Between USU Software and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both USU Software 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 USU Software and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USU Software AG and Rheinmetall AG, you can compare the effects of market volatilities on USU Software 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 USU Software with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of USU Software and Rheinmetall.
Diversification Opportunities for USU Software and Rheinmetall
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between USU and Rheinmetall is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and USU Software 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 USU Software AG 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 USU Software i.e., USU Software and Rheinmetall go up and down completely randomly.
Pair Corralation between USU Software and Rheinmetall
Assuming the 90 days trading horizon USU Software AG is expected to under-perform the Rheinmetall. But the stock apears to be less risky and, when comparing its historical volatility, USU Software AG is 1.92 times less risky than Rheinmetall. The stock trades about -0.22 of its potential returns per unit of risk. The Rheinmetall AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 61,800 in Rheinmetall AG on October 14, 2024 and sell it today you would earn a total of 3,180 from holding Rheinmetall AG or generate 5.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
USU Software AG vs. Rheinmetall AG
Performance |
| Timeline |
| USU Software AG |
| Rheinmetall AG |
USU Software and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USU Software and Rheinmetall
The main advantage of trading using opposite USU Software and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USU Software 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.| USU Software vs. Accenture plc | USU Software vs. International Business Machines | USU Software vs. Capgemini SE | USU Software vs. FUJITSU LTD ADR |
| Rheinmetall vs. PKSHA TECHNOLOGY INC | Rheinmetall vs. USU Software AG | Rheinmetall vs. Guidewire Software | Rheinmetall vs. SMA Solar Technology |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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