Correlation Between Apple and Rheinmetall

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

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

Diversification Opportunities for Apple and Rheinmetall

0.76

Correlation Coefficient

Apple  Rheinmetall

Poor diversification

The 3 months correlation between Apple and Rheinmetall is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Apple 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 Apple Inc 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 Apple i.e., Apple and Rheinmetall go up and down completely randomly.

Pair Corralation between Apple and Rheinmetall

Assuming the 90 days trading horizon Apple is expected to generate 16.02 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Apple Inc is 1.56 times less risky than Rheinmetall. It trades about 0.02 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  60,280  in Rheinmetall AG on October 11, 2024 and sell it today you would earn a total of  4,360  from holding Rheinmetall AG or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Apple Inc  vs.  Rheinmetall AG

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

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

Rheinmetall AG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Rheinmetall exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Rheinmetall

The main advantage of trading using opposite Apple and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.