Correlation Between Rheinmetall and Allianz Technology

Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Allianz 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 Allianz 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 Allianz Technology Trust, you can compare the effects of market volatilities on Rheinmetall and Allianz 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 Allianz Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Allianz Technology.

Diversification Opportunities for Rheinmetall and Allianz Technology

0.91

Correlation Coefficient

Rheinmetall  Allianz Technology

Almost no diversification

The 3 months correlation between Rheinmetall and Allianz is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Allianz Technology Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz Technology Trust 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 Allianz Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz Technology Trust has no effect on the direction of Rheinmetall i.e., Rheinmetall and Allianz Technology go up and down completely randomly.

Pair Corralation between Rheinmetall and Allianz Technology

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.6 times more return on investment than Allianz Technology. However, Rheinmetall is 1.6 times more volatile than Allianz Technology Trust. It trades about 0.3 of its potential returns per unit of risk. Allianz Technology Trust is currently generating about 0.2 per unit of risk. If you would invest  48,615  in Rheinmetall AG on October 25, 2024 and sell it today you would earn a total of  23,405  from holding Rheinmetall AG or generate 48.14% return on investment over 90 days.

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

Rheinmetall AG  vs.  Allianz Technology Trust

Rheinmetall AG

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 23 (%) 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.

Allianz Technology Trust

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rheinmetall and Allianz Technology

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

The idea behind Rheinmetall AG and Allianz Technology Trust 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.