Correlation Between Rheinmetall and Walmart

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

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

Diversification Opportunities for Rheinmetall and Walmart

0.23

Correlation Coefficient

Rheinmetall  Walmart

Modest diversification

The 3 months correlation between Rheinmetall and Walmart is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Rheinmetall i.e., Rheinmetall and Walmart go up and down completely randomly.

Pair Corralation between Rheinmetall and Walmart

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 65.96 times more return on investment than Walmart. However, Rheinmetall is 65.96 times more volatile than Walmart. It trades about 0.4 of its potential returns per unit of risk. Walmart is currently generating about 0.13 per unit of risk. If you would invest  61,900  in Rheinmetall AG on December 25, 2024 and sell it today you would earn a total of  69,850  from holding Rheinmetall AG or generate 112.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Rheinmetall AG  vs.  Walmart

Rheinmetall AG

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Rheinmetall unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart 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 Walmart

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

The idea behind Rheinmetall AG and Walmart 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.