Correlation Between BORR DRILLING and Rheinmetall

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

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

Diversification Opportunities for BORR DRILLING and Rheinmetall

-0.96

Correlation Coefficient

BORR DRILLING  Rheinmetall

Pay attention - limited upside

The 3 months correlation between BORR and Rheinmetall is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding BORR DRILLING NEW and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and BORR DRILLING 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 BORR DRILLING NEW 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 BORR DRILLING i.e., BORR DRILLING and Rheinmetall go up and down completely randomly.

Pair Corralation between BORR DRILLING and Rheinmetall

Assuming the 90 days horizon BORR DRILLING NEW is expected to under-perform the Rheinmetall. But the stock apears to be less risky and, when comparing its historical volatility, BORR DRILLING NEW is 1.04 times less risky than Rheinmetall. The stock trades about -0.2 of its potential returns per unit of risk. The Rheinmetall AG is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  60,760  in Rheinmetall AG on December 31, 2024 and sell it today you would earn a total of  70,340  from holding Rheinmetall AG or generate 115.77% return on investment over 90 days.

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

BORR DRILLING NEW  vs.  Rheinmetall AG

BORR DRILLING NEW

Risk-Adjusted Performance

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rheinmetall AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Rheinmetall exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BORR DRILLING and Rheinmetall

The main advantage of trading using opposite BORR DRILLING and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BORR DRILLING 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 BORR DRILLING NEW 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.