Correlation Between Rheinmetall and British American
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and British American Tobacco, you can compare the effects of market volatilities on Rheinmetall and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and British American.
Diversification Opportunities for Rheinmetall and British American
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and British is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Rheinmetall i.e., Rheinmetall and British American go up and down completely randomly.
Pair Corralation between Rheinmetall and British American
Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.79 times more return on investment than British American. However, Rheinmetall is 1.79 times more volatile than British American Tobacco. It trades about 0.13 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.02 per unit of risk. If you would invest 19,185 in Rheinmetall AG on August 30, 2024 and sell it today you would earn a total of 42,395 from holding Rheinmetall AG or generate 220.98% 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. British American Tobacco
Performance |
| Timeline |
| Rheinmetall AG |
| British American Tobacco |
Rheinmetall and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and British American
The main advantage of trading using opposite Rheinmetall and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Rheinmetall vs. Evolution Mining Limited | Rheinmetall vs. FUYO GENERAL LEASE | Rheinmetall vs. Jacquet Metal Service | Rheinmetall vs. SERI INDUSTRIAL EO |
| British American vs. British American Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Superior Plus Corp | British American vs. NMI Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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