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 ADR and Leonardo Spa, 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
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and Leonardo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG ADR and Leonardo Spa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo Spa 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 ADR 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 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 ADR is expected to generate 0.56 times more return on investment than Leonardo Spa. However, Rheinmetall AG ADR is 1.77 times less risky than Leonardo Spa. It trades about 0.16 of its potential returns per unit of risk. Leonardo Spa is currently generating about 0.09 per unit of risk. If you would invest 6,066 in Rheinmetall AG ADR on September 3, 2024 and sell it today you would earn a total of 7,068 from holding Rheinmetall AG ADR or generate 116.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rheinmetall AG ADR vs. Leonardo Spa
Performance |
| Timeline |
| Rheinmetall AG ADR |
| Leonardo Spa |
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. Hensoldt AG | Rheinmetall vs. Heico | Rheinmetall vs. AeroVironment | Rheinmetall vs. Transdigm Group Incorporated |
| Leonardo Spa vs. The Joint Corp | Leonardo Spa vs. Hudson Technologies | Leonardo Spa vs. CF Industries Holdings | Leonardo Spa vs. Sealed Air |
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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