Correlation Between Rheinmetall and Argo Group

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

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

Diversification Opportunities for Rheinmetall and Argo Group

0.33

Correlation Coefficient

Rheinmetall  Argo Group

Weak diversification

The 3 months correlation between Rheinmetall and Argo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Argo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group Limited 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group Limited has no effect on the direction of Rheinmetall i.e., Rheinmetall and Argo Group go up and down completely randomly.

Pair Corralation between Rheinmetall and Argo Group

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 0.54 times more return on investment than Argo Group. However, Rheinmetall AG is 1.86 times less risky than Argo Group. It trades about 0.13 of its potential returns per unit of risk. Argo Group Limited is currently generating about -0.04 per unit of risk. If you would invest  21,968  in Rheinmetall AG on October 24, 2024 and sell it today you would earn a total of  50,052  from holding Rheinmetall AG or generate 227.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Rheinmetall AG  vs.  Argo Group Limited

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.

Argo Group Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Argo Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rheinmetall and Argo Group

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

The idea behind Rheinmetall AG and Argo Group Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.