Correlation Between Rheinmetall and DXC Technology

Can any of the company-specific risk be diversified away by investing in both Rheinmetall and DXC Technology 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 Rheinmetall and DXC Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rheinmetall AG and DXC Technology Co, you can compare the effects of market volatilities on Rheinmetall and DXC Technology 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 Rheinmetall with a short position of DXC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and DXC Technology.

Diversification Opportunities for Rheinmetall and DXC Technology

0.44

Correlation Coefficient

Rheinmetall  DXC Technology

Very weak diversification

The 3 months correlation between Rheinmetall and DXC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and DXC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXC Technology and Rheinmetall 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 Rheinmetall AG are associated (or correlated) with DXC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXC Technology has no effect on the direction of Rheinmetall i.e., Rheinmetall and DXC Technology go up and down completely randomly.

Pair Corralation between Rheinmetall and DXC Technology

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.02 times more return on investment than DXC Technology. However, Rheinmetall is 1.02 times more volatile than DXC Technology Co. It trades about 0.08 of its potential returns per unit of risk. DXC Technology Co is currently generating about 0.03 per unit of risk. If you would invest  50,010  in Rheinmetall AG on October 8, 2024 and sell it today you would earn a total of  11,350  from holding Rheinmetall AG or generate 22.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.43%
Values	Daily Returns

Rheinmetall AG  vs.  DXC Technology Co

Rheinmetall AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rheinmetall unveiled solid returns over the last few months and may actually be approaching a breakup point.

DXC Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DXC Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DXC Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rheinmetall and DXC Technology

The main advantage of trading using opposite Rheinmetall and DXC Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, DXC Technology 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 DXC Technology will offset losses from the drop in DXC Technology's long position.

The idea behind Rheinmetall AG and DXC Technology Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.