Correlation Between Raytheon Technologies and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies Corp and Rheinmetall AG, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Rheinmetall.
Diversification Opportunities for Raytheon Technologies and Rheinmetall
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Raytheon and Rheinmetall is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG and Raytheon Technologies 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 Raytheon Technologies Corp 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 Raytheon Technologies i.e., Raytheon Technologies and Rheinmetall go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Rheinmetall
Considering the 90-day investment horizon Raytheon Technologies Corp is expected to generate 0.26 times more return on investment than Rheinmetall. However, Raytheon Technologies Corp is 3.92 times less risky than Rheinmetall. It trades about 0.27 of its potential returns per unit of risk. Rheinmetall AG is currently generating about -0.04 per unit of risk. If you would invest 9,776 in Raytheon Technologies Corp on January 30, 2024 and sell it today you would earn a total of 474.50 from holding Raytheon Technologies Corp or generate 4.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.45% |
Values | Daily Returns |
Raytheon Technologies Corp vs. Rheinmetall AG
Performance |
Timeline |
Raytheon Technologies |
Rheinmetall AG |
Raytheon Technologies and Rheinmetall Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Raytheon Technologies and Rheinmetall
The main advantage of trading using opposite Raytheon Technologies and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics | Raytheon Technologies vs. L3Harris Technologies | Raytheon Technologies vs. Lockheed Martin |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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