Correlation Between Rheinmetall and TAMURA P

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

By analyzing existing cross correlation between Rheinmetall AG and TAMURA P, you can compare the effects of market volatilities on Rheinmetall and TAMURA P 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 TAMURA P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and TAMURA P.

Diversification Opportunities for Rheinmetall and TAMURA P

0.03

Correlation Coefficient

Rheinmetall  TAMURA P

Significant diversification

The 3 months correlation between Rheinmetall and TAMURA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and TAMURA P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAMURA P 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 TAMURA P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAMURA P has no effect on the direction of Rheinmetall i.e., Rheinmetall and TAMURA P go up and down completely randomly.

Pair Corralation between Rheinmetall and TAMURA P

Assuming the 90 days trading horizon Rheinmetall AG is expected to generate 1.7 times more return on investment than TAMURA P. However, Rheinmetall is 1.7 times more volatile than TAMURA P. It trades about 0.32 of its potential returns per unit of risk. TAMURA P is currently generating about 0.1 per unit of risk. If you would invest  62,100  in Rheinmetall AG on December 23, 2024 and sell it today you would earn a total of  69,850  from holding Rheinmetall AG or generate 112.48% return on investment over 90 days.

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

Rheinmetall AG  vs.  TAMURA P

Rheinmetall AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Rheinmetall exhibited solid returns over the last few months and may actually be approaching a breakup point.

TAMURA P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAMURA P are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TAMURA P reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rheinmetall and TAMURA P

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

The idea behind Rheinmetall AG and TAMURA P 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.