Correlation Between Garofalo Health and Rheinmetall

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

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

Diversification Opportunities for Garofalo Health and Rheinmetall

-0.07

Correlation Coefficient

Garofalo Health  Rheinmetall

Good diversification

The 3 months correlation between Garofalo and Rheinmetall is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Garofalo Health Care and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Garofalo Health 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 Garofalo Health Care 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 Garofalo Health i.e., Garofalo Health and Rheinmetall go up and down completely randomly.

Pair Corralation between Garofalo Health and Rheinmetall

Assuming the 90 days horizon Garofalo Health is expected to generate 2.85 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Garofalo Health Care is 1.36 times less risky than Rheinmetall. It trades about 0.06 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  21,870  in Rheinmetall AG on October 11, 2024 and sell it today you would earn a total of  43,170  from holding Rheinmetall AG or generate 197.39% return on investment over 90 days.

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

Garofalo Health Care  vs.  Rheinmetall AG

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Garofalo Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rheinmetall AG

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 21 (%) 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 Garofalo Health and Rheinmetall

The main advantage of trading using opposite Garofalo Health and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garofalo Health 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 Garofalo Health Care 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.