Correlation Between Metals Exploration and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Metals Exploration 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 Metals Exploration and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metals Exploration Plc and Rheinmetall AG, you can compare the effects of market volatilities on Metals Exploration 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 Metals Exploration with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals Exploration and Rheinmetall.
Diversification Opportunities for Metals Exploration and Rheinmetall
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Metals and Rheinmetall is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Metals Exploration 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 Metals Exploration 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 Metals Exploration i.e., Metals Exploration and Rheinmetall go up and down completely randomly.
Pair Corralation between Metals Exploration and Rheinmetall
Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.88 times more return on investment than Rheinmetall. However, Metals Exploration is 1.88 times more volatile than Rheinmetall AG. It trades about 0.1 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.16 per unit of risk. If you would invest 270.00 in Metals Exploration Plc on October 22, 2024 and sell it today you would earn a total of 325.00 from holding Metals Exploration Plc or generate 120.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Metals Exploration Plc vs. Rheinmetall AG
Performance |
Timeline |
Metals Exploration Plc |
Rheinmetall AG |
Metals Exploration and Rheinmetall Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metals Exploration and Rheinmetall
The main advantage of trading using opposite Metals Exploration and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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.Metals Exploration vs. URU Metals | Metals Exploration vs. Golden Metal Resources | Metals Exploration vs. Panther Metals PLC | Metals Exploration vs. FC Investment Trust |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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