Correlation Between Rheinmetall and SMTPC EO
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and SMTPC EO 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 Rheinmetall and SMTPC EO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and SMTPC EO 305, you can compare the effects of market volatilities on Rheinmetall and SMTPC EO 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 Rheinmetall with a short position of SMTPC EO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and SMTPC EO.
Diversification Opportunities for Rheinmetall and SMTPC EO
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and SMTPC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and SMTPC EO 305 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMTPC EO 305 and Rheinmetall 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 Rheinmetall AG are associated (or correlated) with SMTPC EO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMTPC EO 305 has no effect on the direction of Rheinmetall i.e., Rheinmetall and SMTPC EO go up and down completely randomly.
Pair Corralation between Rheinmetall and SMTPC EO
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 2.55 times more return on investment than SMTPC EO. However, Rheinmetall is 2.55 times more volatile than SMTPC EO 305. It trades about 0.29 of its potential returns per unit of risk. SMTPC EO 305 is currently generating about 0.1 per unit of risk. If you would invest 72,280 in Rheinmetall AG on November 28, 2024 and sell it today you would earn a total of 23,720 from holding Rheinmetall AG or generate 32.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. SMTPC EO 305
Performance |
| Timeline |
| Rheinmetall AG |
| SMTPC EO 305 |
Rheinmetall and SMTPC EO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and SMTPC EO
The main advantage of trading using opposite Rheinmetall and SMTPC EO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, SMTPC EO 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 SMTPC EO will offset losses from the drop in SMTPC EO's long position.| Rheinmetall vs. Scottish Mortgage Investment | Rheinmetall vs. Yuexiu Transport Infrastructure | Rheinmetall vs. Air Transport Services | Rheinmetall vs. Guangdong Investment Limited |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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