Correlation Between Thales SA and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Thales SA 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 Thales SA and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thales SA ADR and Rheinmetall AG ADR, you can compare the effects of market volatilities on Thales SA 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 Thales SA with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Rheinmetall.
Diversification Opportunities for Thales SA and Rheinmetall
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Thales and Rheinmetall is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA ADR and Rheinmetall AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG ADR and Thales SA 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 Thales SA ADR 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 ADR has no effect on the direction of Thales SA i.e., Thales SA and Rheinmetall go up and down completely randomly.
Pair Corralation between Thales SA and Rheinmetall
Assuming the 90 days horizon Thales SA is expected to generate 15.88 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Thales SA ADR is 1.24 times less risky than Rheinmetall. It trades about 0.01 of its potential returns per unit of risk. Rheinmetall AG ADR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 6,066 in Rheinmetall AG ADR on September 3, 2024 and sell it today you would earn a total of 7,068 from holding Rheinmetall AG ADR or generate 116.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thales SA ADR vs. Rheinmetall AG ADR
Performance |
| Timeline |
| Thales SA ADR |
| Rheinmetall AG ADR |
Thales SA and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thales SA and Rheinmetall
The main advantage of trading using opposite Thales SA and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales SA 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.| Thales SA vs. Rolls Royce Holdings PLC | Thales SA vs. VirTra Inc | Thales SA vs. BWX Technologies | Thales SA vs. Embraer SA ADR |
| Rheinmetall vs. Hensoldt AG | Rheinmetall vs. Heico | Rheinmetall vs. AeroVironment | Rheinmetall vs. Transdigm Group Incorporated |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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