Correlation Between Rheinmetall and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Northrop Grumman 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 Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Northrop Grumman, you can compare the effects of market volatilities on Rheinmetall and Northrop Grumman 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 Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Northrop Grumman.
Diversification Opportunities for Rheinmetall and Northrop Grumman
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rheinmetall and Northrop is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman 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 Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of Rheinmetall i.e., Rheinmetall and Northrop Grumman go up and down completely randomly.
Pair Corralation between Rheinmetall and Northrop Grumman
Assuming the 90 days horizon Rheinmetall AG is expected to generate 2.48 times more return on investment than Northrop Grumman. However, Rheinmetall is 2.48 times more volatile than Northrop Grumman. It trades about 0.13 of its potential returns per unit of risk. Northrop Grumman is currently generating about -0.39 per unit of risk. If you would invest 59,035 in Rheinmetall AG on September 12, 2024 and sell it today you would earn a total of 4,565 from holding Rheinmetall AG or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG vs. Northrop Grumman
Performance |
| Timeline |
| Rheinmetall AG |
| Northrop Grumman |
Rheinmetall and Northrop Grumman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Northrop Grumman
The main advantage of trading using opposite Rheinmetall and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
| Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. The Boeing | Northrop Grumman vs. L3Harris Technologies |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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