Correlation Between Rheinmetall and United Parcel

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

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

Diversification Opportunities for Rheinmetall and United Parcel

-0.39

Correlation Coefficient

Rheinmetall  United Parcel

Very good diversification

The 3 months correlation between Rheinmetall and United is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Rheinmetall i.e., Rheinmetall and United Parcel go up and down completely randomly.

Pair Corralation between Rheinmetall and United Parcel

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.41 times more return on investment than United Parcel. However, Rheinmetall is 1.41 times more volatile than United Parcel Service. It trades about 0.39 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.08 per unit of risk. If you would invest  61,900  in Rheinmetall AG on December 26, 2024 and sell it today you would earn a total of  69,875  from holding Rheinmetall AG or generate 112.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Rheinmetall AG  vs.  United Parcel Service

Rheinmetall AG

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 30 (%) 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.

United Parcel Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rheinmetall and United Parcel

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

The idea behind Rheinmetall AG and United Parcel Service 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.