Correlation Between Rheinmetall and Nordea Bank

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

By analyzing existing cross correlation between Rheinmetall AG and Nordea Bank Abp, you can compare the effects of market volatilities on Rheinmetall and Nordea Bank 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 Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Nordea Bank.

Diversification Opportunities for Rheinmetall and Nordea Bank

-0.02

Correlation Coefficient

Rheinmetall  Nordea Bank

Good diversification

The 3 months correlation between Rheinmetall and Nordea is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Rheinmetall i.e., Rheinmetall and Nordea Bank go up and down completely randomly.

Pair Corralation between Rheinmetall and Nordea Bank

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.68 times more return on investment than Nordea Bank. However, Rheinmetall is 1.68 times more volatile than Nordea Bank Abp. It trades about 0.25 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.09 per unit of risk. If you would invest  47,280  in Rheinmetall AG on October 11, 2024 and sell it today you would earn a total of  17,440  from holding Rheinmetall AG or generate 36.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Rheinmetall AG  vs.  Nordea Bank Abp

Rheinmetall AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 19 (%) 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.

Nordea Bank Abp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nordea Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rheinmetall and Nordea Bank

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

The idea behind Rheinmetall AG and Nordea Bank Abp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.