Correlation Between Spire Global and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Spire Global 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 Spire Global and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spire Global and Rheinmetall AG, you can compare the effects of market volatilities on Spire Global 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 Spire Global with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and Rheinmetall.
Diversification Opportunities for Spire Global and Rheinmetall
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spire and Rheinmetall is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Spire Global 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 Spire Global 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 Spire Global i.e., Spire Global and Rheinmetall go up and down completely randomly.
Pair Corralation between Spire Global and Rheinmetall
Given the investment horizon of 90 days Spire Global is expected to generate 2.29 times more return on investment than Rheinmetall. However, Spire Global is 2.29 times more volatile than Rheinmetall AG. It trades about 0.08 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.13 per unit of risk. If you would invest 680.00 in Spire Global on September 4, 2024 and sell it today you would earn a total of 797.00 from holding Spire Global or generate 117.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.38% |
| Values | Daily Returns |
Spire Global vs. Rheinmetall AG
Performance |
| Timeline |
| Spire Global |
| Rheinmetall AG |
Spire Global and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spire Global and Rheinmetall
The main advantage of trading using opposite Spire Global and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire Global 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.| Spire Global vs. Lichen China Limited | Spire Global vs. Unifirst | Spire Global vs. First Advantage Corp | Spire Global vs. Performant Financial |
| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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