Correlation Between Rheinmetall and VirTra
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and VirTra 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 VirTra 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 VirTra Inc, you can compare the effects of market volatilities on Rheinmetall and VirTra 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 VirTra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and VirTra.
Diversification Opportunities for Rheinmetall and VirTra
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and VirTra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG ADR and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc 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 VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of Rheinmetall i.e., Rheinmetall and VirTra go up and down completely randomly.
Pair Corralation between Rheinmetall and VirTra
Assuming the 90 days horizon Rheinmetall AG ADR is expected to generate 0.41 times more return on investment than VirTra. However, Rheinmetall AG ADR is 2.47 times less risky than VirTra. It trades about 0.15 of its potential returns per unit of risk. VirTra Inc is currently generating about 0.02 per unit of risk. If you would invest 6,034 in Rheinmetall AG ADR on September 14, 2024 and sell it today you would earn a total of 7,019 from holding Rheinmetall AG ADR or generate 116.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Rheinmetall AG ADR vs. VirTra Inc
Performance |
| Timeline |
| Rheinmetall AG ADR |
| VirTra Inc |
Rheinmetall and VirTra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and VirTra
The main advantage of trading using opposite Rheinmetall and VirTra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, VirTra 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 VirTra will offset losses from the drop in VirTra's long position.| Rheinmetall vs. VirTra Inc | Rheinmetall vs. BWX Technologies | Rheinmetall vs. Embraer SA ADR | Rheinmetall vs. HEICO |
| VirTra vs. Innovative Solutions and | VirTra vs. Park Electrochemical | VirTra vs. Ducommun Incorporated | VirTra vs. National Presto Industries |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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