Correlation Between Raytheon Technologies and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies and Rolls Royce 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 Rolls Royce 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 Rolls Royce Holdings plc, you can compare the effects of market volatilities on Raytheon Technologies and Rolls Royce 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 Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Rolls Royce.
Diversification Opportunities for Raytheon Technologies and Rolls Royce
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Raytheon and Rolls is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Rolls Royce Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Rolls Royce go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Rolls Royce
Assuming the 90 days horizon Raytheon Technologies is expected to generate 7.96 times less return on investment than Rolls Royce. But when comparing it to its historical volatility, Raytheon Technologies Corp is 1.76 times less risky than Rolls Royce. It trades about 0.04 of its potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 106.00 in Rolls Royce Holdings plc on September 12, 2024 and sell it today you would earn a total of 602.00 from holding Rolls Royce Holdings plc or generate 567.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. Rolls Royce Holdings plc
Performance |
| Timeline |
| Raytheon Technologies |
| Rolls Royce Holdings |
Raytheon Technologies and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Rolls Royce
The main advantage of trading using opposite Raytheon Technologies and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies position performs unexpectedly, Rolls Royce 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 Rolls Royce will offset losses from the drop in Rolls Royce's long position.| Raytheon Technologies vs. JAPAN AIRLINES | Raytheon Technologies vs. Elmos Semiconductor SE | Raytheon Technologies vs. Singapore Airlines Limited | Raytheon Technologies vs. Marie Brizard Wine |
| Rolls Royce vs. LANDSEA GREEN MANAGEMENT | Rolls Royce vs. PREMIER FOODS | Rolls Royce vs. Q2M Managementberatung AG | Rolls Royce vs. CeoTronics AG |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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