Correlation Between Rheinmetall and FirstGroup Plc

Can any of the company-specific risk be diversified away by investing in both Rheinmetall and FirstGroup 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 FirstGroup 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 FirstGroup plc, you can compare the effects of market volatilities on Rheinmetall and FirstGroup 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 FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and FirstGroup Plc.

Diversification Opportunities for Rheinmetall and FirstGroup Plc

0.64

Correlation Coefficient

Rheinmetall  FirstGroup Plc

Poor diversification

The 3 months correlation between Rheinmetall and FirstGroup is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc 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 FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Rheinmetall i.e., Rheinmetall and FirstGroup Plc go up and down completely randomly.

Pair Corralation between Rheinmetall and FirstGroup Plc

Assuming the 90 days trading horizon Rheinmetall is expected to generate 1.11 times less return on investment than FirstGroup Plc. In addition to that, Rheinmetall is 1.37 times more volatile than FirstGroup plc. It trades about 0.16 of its total potential returns per unit of risk. FirstGroup plc is currently generating about 0.25 per unit of volatility. If you would invest  186.00  in FirstGroup plc on April 24, 2025 and sell it today you would earn a total of  67.00  from holding FirstGroup plc or generate 36.02% return on investment over 90 days.

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

Rheinmetall AG  vs.  FirstGroup plc

Rheinmetall AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Rheinmetall sustained solid returns over the last few months and may actually be approaching a breakup point.

FirstGroup plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FirstGroup Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rheinmetall and FirstGroup Plc

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

The idea behind Rheinmetall AG and FirstGroup plc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.