Correlation Between Visa and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Rheinmetall AG, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Rheinmetall.
Diversification Opportunities for Visa and Rheinmetall
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Visa and Rheinmetall is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Visa 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 Visa Class A 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 Visa i.e., Visa and Rheinmetall go up and down completely randomly.
Pair Corralation between Visa and Rheinmetall
Taking into account the 90-day investment horizon Visa is expected to generate 3.02 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Visa Class A is 1.99 times less risky than Rheinmetall. It trades about 0.11 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 26,754 in Rheinmetall AG on October 25, 2024 and sell it today you would earn a total of 45,266 from holding Rheinmetall AG or generate 169.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.04% |
| Values | Daily Returns |
Visa Class A vs. Rheinmetall AG
Performance |
| Timeline |
| Visa Class A |
| Rheinmetall AG |
Visa and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Rheinmetall
The main advantage of trading using opposite Visa and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Rheinmetall vs. United Airlines Holdings | Rheinmetall vs. International Consolidated Airlines | Rheinmetall vs. Pets at Home | Rheinmetall vs. Eastman Chemical Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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