Correlation Between National Atomic and Rheinmetall

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

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

Diversification Opportunities for National Atomic and Rheinmetall

-0.31

Correlation Coefficient

National Atomic  Rheinmetall

Very good diversification

The 3 months correlation between National and Rheinmetall is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Atomic Co and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and National Atomic 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 National Atomic Co 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 National Atomic i.e., National Atomic and Rheinmetall go up and down completely randomly.

Pair Corralation between National Atomic and Rheinmetall

Assuming the 90 days trading horizon National Atomic is expected to generate 3.05 times less return on investment than Rheinmetall. In addition to that, National Atomic is 1.21 times more volatile than Rheinmetall AG. It trades about 0.04 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.13 per unit of volatility. If you would invest  21,258  in Rheinmetall AG on October 23, 2024 and sell it today you would earn a total of  47,962  from holding Rheinmetall AG or generate 225.62% return on investment over 90 days.

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

National Atomic Co  vs.  Rheinmetall AG

National Atomic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Atomic Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, National Atomic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 comparatively uncertain basic indicators, Rheinmetall unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Atomic and Rheinmetall

The main advantage of trading using opposite National Atomic and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Atomic 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 National Atomic Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.