Correlation Between GoldMining and Rheinmetall

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

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

Diversification Opportunities for GoldMining and Rheinmetall

-0.44

Correlation Coefficient

GoldMining  Rheinmetall

Very good diversification

The 3 months correlation between GoldMining and Rheinmetall is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and GoldMining 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 GoldMining are associated (or correlated) with Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of GoldMining i.e., GoldMining and Rheinmetall go up and down completely randomly.

Pair Corralation between GoldMining and Rheinmetall

Assuming the 90 days trading horizon GoldMining is expected to under-perform the Rheinmetall. In addition to that, GoldMining is 1.25 times more volatile than Rheinmetall AG. It trades about -0.06 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.16 per unit of volatility. If you would invest  50,157  in Rheinmetall AG on October 7, 2024 and sell it today you would earn a total of  11,203  from holding Rheinmetall AG or generate 22.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	69.84%
Values	Daily Returns

GoldMining  vs.  Rheinmetall AG

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Rheinmetall AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 12 (%) 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.

Pair Trading with GoldMining and Rheinmetall

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

The idea behind GoldMining and Rheinmetall AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.