Correlation Between Eve Holding and Rheinmetall

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

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

Diversification Opportunities for Eve Holding and Rheinmetall

0.68

Correlation Coefficient

Eve Holding  Rheinmetall

Poor diversification

The 3 months correlation between Eve and Rheinmetall is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and Rheinmetall AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG ADR and Eve Holding 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 Eve Holding 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 ADR has no effect on the direction of Eve Holding i.e., Eve Holding and Rheinmetall go up and down completely randomly.

Pair Corralation between Eve Holding and Rheinmetall

Given the investment horizon of 90 days Eve Holding is expected to generate 1.98 times more return on investment than Rheinmetall. However, Eve Holding is 1.98 times more volatile than Rheinmetall AG ADR. It trades about 0.23 of its potential returns per unit of risk. Rheinmetall AG ADR is currently generating about 0.1 per unit of risk. If you would invest  319.00  in Eve Holding on October 3, 2024 and sell it today you would earn a total of  237.00  from holding Eve Holding or generate 74.29% return on investment over 90 days.

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

Eve Holding  vs.  Rheinmetall AG ADR

Eve Holding

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Eve Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Rheinmetall AG ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Rheinmetall showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eve Holding and Rheinmetall

The main advantage of trading using opposite Eve Holding and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eve Holding 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 Eve Holding and Rheinmetall AG ADR 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.