Correlation Between Rheinmetall and AeroVironment
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and AeroVironment 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 AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and AeroVironment, you can compare the effects of market volatilities on Rheinmetall and AeroVironment 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 AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and AeroVironment.
Diversification Opportunities for Rheinmetall and AeroVironment
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rheinmetall and AeroVironment is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Rheinmetall i.e., Rheinmetall and AeroVironment go up and down completely randomly.
Pair Corralation between Rheinmetall and AeroVironment
Assuming the 90 days horizon Rheinmetall AG is expected to generate 1.03 times more return on investment than AeroVironment. However, Rheinmetall is 1.03 times more volatile than AeroVironment. It trades about 0.45 of its potential returns per unit of risk. AeroVironment is currently generating about -0.08 per unit of risk. If you would invest 50,280 in Rheinmetall AG on September 4, 2024 and sell it today you would earn a total of 15,870 from holding Rheinmetall AG or generate 31.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. AeroVironment
Performance |
| Timeline |
| Rheinmetall AG |
| AeroVironment |
Rheinmetall and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and AeroVironment
The main advantage of trading using opposite Rheinmetall and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
| AeroVironment vs. L3Harris Technologies | AeroVironment vs. Mercury Systems | AeroVironment vs. Textron | AeroVironment vs. HEICO |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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