Correlation Between Rheinmetall and Applied Materials

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

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

Diversification Opportunities for Rheinmetall and Applied Materials

0.35

Correlation Coefficient

Rheinmetall  Applied Materials

Weak diversification

The 3 months correlation between Rheinmetall and Applied is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Rheinmetall i.e., Rheinmetall and Applied Materials go up and down completely randomly.

Pair Corralation between Rheinmetall and Applied Materials

Assuming the 90 days trading horizon Rheinmetall is expected to generate 1.77 times less return on investment than Applied Materials. In addition to that, Rheinmetall is 1.27 times more volatile than Applied Materials. It trades about 0.06 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.14 per unit of volatility. If you would invest  15,141  in Applied Materials on May 7, 2025 and sell it today you would earn a total of  2,939  from holding Applied Materials or generate 19.41% return on investment over 90 days.

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

Rheinmetall AG  vs.  Applied Materials

Rheinmetall AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rheinmetall AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rheinmetall may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Applied Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rheinmetall and Applied Materials

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

The idea behind Rheinmetall AG and Applied Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.