Correlation Between Rheinmetall and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Raytheon Technologies 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 Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Raytheon Technologies Corp, you can compare the effects of market volatilities on Rheinmetall and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Raytheon Technologies.
Diversification Opportunities for Rheinmetall and Raytheon Technologies
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rheinmetall and Raytheon is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Rheinmetall i.e., Rheinmetall and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Rheinmetall and Raytheon Technologies
Assuming the 90 days horizon Rheinmetall AG is expected to generate 1.94 times more return on investment than Raytheon Technologies. However, Rheinmetall is 1.94 times more volatile than Raytheon Technologies Corp. It trades about 0.45 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.03 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. Raytheon Technologies Corp
Performance |
| Timeline |
| Rheinmetall AG |
| Raytheon Technologies |
Rheinmetall and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Raytheon Technologies
The main advantage of trading using opposite Rheinmetall and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
| Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics | Raytheon Technologies vs. The Boeing | Raytheon Technologies 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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