Correlation Between Huntington Ingalls and Rheinmetall

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

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

Diversification Opportunities for Huntington Ingalls and Rheinmetall

-0.73

Correlation Coefficient

Huntington Ingalls  Rheinmetall

Pay attention - limited upside

The 3 months correlation between Huntington and Rheinmetall is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Ingalls Industries 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 Huntington Ingalls 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 Huntington Ingalls Industries 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 Huntington Ingalls i.e., Huntington Ingalls and Rheinmetall go up and down completely randomly.

Pair Corralation between Huntington Ingalls and Rheinmetall

Considering the 90-day investment horizon Huntington Ingalls Industries is expected to under-perform the Rheinmetall. In addition to that, Huntington Ingalls is 1.31 times more volatile than Rheinmetall AG ADR. It trades about -0.05 of its total potential returns per unit of risk. Rheinmetall AG ADR is currently generating about 0.09 per unit of volatility. If you would invest  10,323  in Rheinmetall AG ADR on September 30, 2024 and sell it today you would earn a total of  2,533  from holding Rheinmetall AG ADR or generate 24.54% return on investment over 90 days.

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

Huntington Ingalls Industries  vs.  Rheinmetall AG ADR

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Rheinmetall AG ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Rheinmetall showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Huntington Ingalls and Rheinmetall

The main advantage of trading using opposite Huntington Ingalls and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntington Ingalls 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 Huntington Ingalls Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.