Correlation Between Rheinmetall and ASPEN TECHINC
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and ASPEN TECHINC 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 ASPEN TECHINC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and ASPEN TECHINC DL, you can compare the effects of market volatilities on Rheinmetall and ASPEN TECHINC 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 ASPEN TECHINC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and ASPEN TECHINC.
Diversification Opportunities for Rheinmetall and ASPEN TECHINC
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rheinmetall and ASPEN is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL 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 ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of Rheinmetall i.e., Rheinmetall and ASPEN TECHINC go up and down completely randomly.
Pair Corralation between Rheinmetall and ASPEN TECHINC
Assuming the 90 days horizon Rheinmetall AG is expected to generate 1.45 times more return on investment than ASPEN TECHINC. However, Rheinmetall is 1.45 times more volatile than ASPEN TECHINC DL. It trades about 0.18 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.14 per unit of risk. If you would invest 52,020 in Rheinmetall AG on November 2, 2024 and sell it today you would earn a total of 23,020 from holding Rheinmetall AG or generate 44.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.04% |
| Values | Daily Returns |
Rheinmetall AG vs. ASPEN TECHINC DL
Performance |
| Timeline |
| Rheinmetall AG |
| ASPEN TECHINC DL |
Rheinmetall and ASPEN TECHINC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and ASPEN TECHINC
The main advantage of trading using opposite Rheinmetall and ASPEN TECHINC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, ASPEN TECHINC 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 ASPEN TECHINC will offset losses from the drop in ASPEN TECHINC's long position.| Rheinmetall vs. Honeywell International | Rheinmetall vs. Illinois Tool Works | Rheinmetall vs. Eaton PLC | Rheinmetall vs. Trane Technologies plc |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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