Correlation Between Rheinmetall and UNIPHAR PLC

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

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

Diversification Opportunities for Rheinmetall and UNIPHAR PLC

-0.74

Correlation Coefficient

Rheinmetall  UNIPHAR PLC

Pay attention - limited upside

The 3 months correlation between Rheinmetall and UNIPHAR is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and UNIPHAR PLC EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIPHAR PLC EO and Rheinmetall 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 Rheinmetall AG are associated (or correlated) with UNIPHAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIPHAR PLC EO has no effect on the direction of Rheinmetall i.e., Rheinmetall and UNIPHAR PLC go up and down completely randomly.

Pair Corralation between Rheinmetall and UNIPHAR PLC

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 0.84 times more return on investment than UNIPHAR PLC. However, Rheinmetall AG is 1.19 times less risky than UNIPHAR PLC. It trades about 0.23 of its potential returns per unit of risk. UNIPHAR PLC EO is currently generating about -0.08 per unit of risk. If you would invest  60,280  in Rheinmetall AG on October 11, 2024 and sell it today you would earn a total of  4,360  from holding Rheinmetall AG or generate 7.23% return on investment over 90 days.

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

Rheinmetall AG  vs.  UNIPHAR PLC EO

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 rather uncertain primary indicators, Rheinmetall exhibited solid returns over the last few months and may actually be approaching a breakup point.

UNIPHAR PLC EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIPHAR PLC EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Rheinmetall and UNIPHAR PLC

The main advantage of trading using opposite Rheinmetall and UNIPHAR PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, UNIPHAR PLC 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 UNIPHAR PLC will offset losses from the drop in UNIPHAR PLC's long position.

The idea behind Rheinmetall AG and UNIPHAR PLC EO 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .