Correlation Between State Bank and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both State Bank 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 State Bank and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Bank of and Rheinmetall AG, you can compare the effects of market volatilities on State Bank 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 State Bank with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Rheinmetall.
Diversification Opportunities for State Bank and Rheinmetall
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Rheinmetall is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and State Bank 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 State Bank of 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 State Bank i.e., State Bank and Rheinmetall go up and down completely randomly.
Pair Corralation between State Bank and Rheinmetall
Assuming the 90 days horizon State Bank is expected to generate 9.08 times less return on investment than Rheinmetall. In addition to that, State Bank is 1.05 times more volatile than Rheinmetall AG. It trades about 0.07 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.67 per unit of volatility. If you would invest 46,890 in Rheinmetall AG on September 3, 2024 and sell it today you would earn a total of 15,430 from holding Rheinmetall AG or generate 32.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Bank of vs. Rheinmetall AG
Performance |
| Timeline |
| State Bank |
| Rheinmetall AG |
State Bank and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Rheinmetall
The main advantage of trading using opposite State Bank and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank 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.| State Bank vs. Evolution Mining Limited | State Bank vs. MTI WIRELESS EDGE | State Bank vs. GALENA MINING LTD | State Bank vs. MCEWEN MINING INC |
| Rheinmetall vs. VIVA WINE GROUP | Rheinmetall vs. Compugroup Medical SE | Rheinmetall vs. Apollo Medical Holdings | Rheinmetall vs. VIRGIN WINES UK |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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