Correlation Between Rheinmetall and Leonardo SpA
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Leonardo SpA 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 Leonardo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Leonardo SpA ADR, you can compare the effects of market volatilities on Rheinmetall and Leonardo SpA 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 Leonardo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Leonardo SpA.
Diversification Opportunities for Rheinmetall and Leonardo SpA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and Leonardo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Leonardo SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo SpA ADR 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 Leonardo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo SpA ADR has no effect on the direction of Rheinmetall i.e., Rheinmetall and Leonardo SpA go up and down completely randomly.
Pair Corralation between Rheinmetall and Leonardo SpA
Assuming the 90 days horizon Rheinmetall AG is expected to generate 1.53 times more return on investment than Leonardo SpA. However, Rheinmetall is 1.53 times more volatile than Leonardo SpA ADR. It trades about 0.45 of its potential returns per unit of risk. Leonardo SpA ADR is currently generating about 0.35 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. Leonardo SpA ADR
Performance |
| Timeline |
| Rheinmetall AG |
| Leonardo SpA ADR |
Rheinmetall and Leonardo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Leonardo SpA
The main advantage of trading using opposite Rheinmetall and Leonardo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Leonardo SpA 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 Leonardo SpA will offset losses from the drop in Leonardo SpA's long position.| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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