Correlation Between Rheinmetall and ITV Plc
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and ITV Plc 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 ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and ITV plc, you can compare the effects of market volatilities on Rheinmetall and ITV Plc 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 ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and ITV Plc.
Diversification Opportunities for Rheinmetall and ITV Plc
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rheinmetall and ITV is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc 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 ITV Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV plc has no effect on the direction of Rheinmetall i.e., Rheinmetall and ITV Plc go up and down completely randomly.
Pair Corralation between Rheinmetall and ITV Plc
Assuming the 90 days horizon Rheinmetall AG is expected to generate 0.84 times more return on investment than ITV Plc. However, Rheinmetall AG is 1.2 times less risky than ITV Plc. It trades about 0.15 of its potential returns per unit of risk. ITV plc is currently generating about 0.05 per unit of risk. If you would invest 32,799 in Rheinmetall AG on October 20, 2024 and sell it today you would earn a total of 36,301 from holding Rheinmetall AG or generate 110.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Rheinmetall AG vs. ITV plc
Performance |
| Timeline |
| Rheinmetall AG |
| ITV plc |
Rheinmetall and ITV Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and ITV Plc
The main advantage of trading using opposite Rheinmetall and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, ITV Plc 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 ITV Plc will offset losses from the drop in ITV Plc's long position.| Rheinmetall vs. Eaton PLC | Rheinmetall vs. ABB | Rheinmetall vs. 3M Company | Rheinmetall vs. Emerson Electric Co |
| ITV Plc vs. VIVENDI UNSPONARD EO | ITV Plc vs. News Corporation | ITV Plc vs. News Corporation | ITV Plc vs. RTL Group SA |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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