Correlation Between Rheinmetall and GreenX Metals

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

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

Diversification Opportunities for Rheinmetall and GreenX Metals

-0.85

Correlation Coefficient

Rheinmetall  GreenX Metals

Pay attention - limited upside

The 3 months correlation between Rheinmetall and GreenX is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals 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 GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Rheinmetall i.e., Rheinmetall and GreenX Metals go up and down completely randomly.

Pair Corralation between Rheinmetall and GreenX Metals

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.07 times more return on investment than GreenX Metals. However, Rheinmetall is 1.07 times more volatile than GreenX Metals. It trades about 0.25 of its potential returns per unit of risk. GreenX Metals is currently generating about -0.07 per unit of risk. If you would invest  49,585  in Rheinmetall AG on October 22, 2024 and sell it today you would earn a total of  19,875  from holding Rheinmetall AG or generate 40.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Rheinmetall AG  vs.  GreenX Metals

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.

GreenX Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenX Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Rheinmetall and GreenX Metals

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

The idea behind Rheinmetall AG and GreenX Metals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.