Correlation Between LBG Media and Rheinmetall

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

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

Diversification Opportunities for LBG Media and Rheinmetall

-0.58

Correlation Coefficient

LBG Media  Rheinmetall

Excellent diversification

The 3 months correlation between LBG and Rheinmetall is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding LBG Media PLC and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and LBG Media 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 LBG Media PLC 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 LBG Media i.e., LBG Media and Rheinmetall go up and down completely randomly.

Pair Corralation between LBG Media and Rheinmetall

Assuming the 90 days trading horizon LBG Media is expected to generate 3.98 times less return on investment than Rheinmetall. In addition to that, LBG Media is 1.29 times more volatile than Rheinmetall AG. It trades about 0.02 of its total potential returns per unit of risk. Rheinmetall AG is currently generating about 0.12 per unit of volatility. If you would invest  21,754  in Rheinmetall AG on October 11, 2024 and sell it today you would earn a total of  43,106  from holding Rheinmetall AG or generate 198.15% return on investment over 90 days.

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

LBG Media PLC  vs.  Rheinmetall AG

LBG Media PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LBG Media PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, LBG Media 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 19 (%) 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 LBG Media and Rheinmetall

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

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.