Correlation Between SMA Solar and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both SMA Solar and Rheinmetall 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 SMA Solar and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Rheinmetall AG, you can compare the effects of market volatilities on SMA Solar and Rheinmetall 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 SMA Solar with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Rheinmetall.
Diversification Opportunities for SMA Solar and Rheinmetall
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SMA and Rheinmetall is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and SMA Solar 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 SMA Solar Technology are associated (or correlated) with Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of SMA Solar i.e., SMA Solar and Rheinmetall go up and down completely randomly.
Pair Corralation between SMA Solar and Rheinmetall
Assuming the 90 days horizon SMA Solar Technology is expected to generate 2.44 times more return on investment than Rheinmetall. However, SMA Solar is 2.44 times more volatile than Rheinmetall AG. It trades about 0.07 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.16 per unit of risk. If you would invest 1,434 in SMA Solar Technology on October 14, 2024 and sell it today you would earn a total of 58.00 from holding SMA Solar Technology or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Rheinmetall AG
Performance |
| Timeline |
| SMA Solar Technology |
| Rheinmetall AG |
SMA Solar and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Rheinmetall
The main advantage of trading using opposite SMA Solar and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall's long position.| SMA Solar vs. MOLSON RS BEVERAGE | SMA Solar vs. HOCHSCHILD MINING | SMA Solar vs. THAI BEVERAGE | SMA Solar vs. The Boston Beer |
| Rheinmetall vs. PKSHA TECHNOLOGY INC | Rheinmetall vs. USU Software AG | Rheinmetall vs. Guidewire Software | Rheinmetall vs. SMA Solar Technology |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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