Correlation Between Rheinmetall and Huntington Ingalls

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

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

Diversification Opportunities for Rheinmetall and Huntington Ingalls

-0.41

Correlation Coefficient

Rheinmetall  Huntington Ingalls

Very good diversification

The 3 months correlation between Rheinmetall and Huntington is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Rheinmetall i.e., Rheinmetall and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Rheinmetall and Huntington Ingalls

Assuming the 90 days horizon Rheinmetall AG is expected to generate 0.81 times more return on investment than Huntington Ingalls. However, Rheinmetall AG is 1.24 times less risky than Huntington Ingalls. It trades about 0.08 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  58,900  in Rheinmetall AG on September 3, 2024 and sell it today you would earn a total of  7,408  from holding Rheinmetall AG or generate 12.58% return on investment over 90 days.

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

Rheinmetall AG  vs.  Huntington Ingalls Industries

Rheinmetall AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Rheinmetall reported solid returns over the last few months and may actually be approaching a breakup point.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Rheinmetall and Huntington Ingalls

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

The idea behind Rheinmetall AG and Huntington Ingalls Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.