Correlation Between Rheinmetall and Heico
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Heico 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 Heico 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 Heico, you can compare the effects of market volatilities on Rheinmetall and Heico 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 Heico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Heico.
Diversification Opportunities for Rheinmetall and Heico
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and Heico is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG ADR and Heico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heico 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 Heico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heico has no effect on the direction of Rheinmetall i.e., Rheinmetall and Heico go up and down completely randomly.
Pair Corralation between Rheinmetall and Heico
Assuming the 90 days horizon Rheinmetall AG ADR is expected to generate 1.35 times more return on investment than Heico. However, Rheinmetall is 1.35 times more volatile than Heico. It trades about 0.51 of its potential returns per unit of risk. Heico is currently generating about 0.3 per unit of risk. If you would invest 10,321 in Rheinmetall AG ADR on September 2, 2024 and sell it today you would earn a total of 2,813 from holding Rheinmetall AG ADR or generate 27.26% 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. Heico
Performance |
| Timeline |
| Rheinmetall AG ADR |
| Heico |
Rheinmetall and Heico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Heico
The main advantage of trading using opposite Rheinmetall and Heico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Heico 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 Heico will offset losses from the drop in Heico's long position.| Rheinmetall vs. Firan Technology Group | Rheinmetall vs. 808 Renewable Energy | Rheinmetall vs. Park Electrochemical | Rheinmetall vs. Innovative Solutions and |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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