Correlation Between AAR Corp and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both AAR Corp 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 AAR Corp and Rolls Royce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Rolls Royce Holdings PLC, you can compare the effects of market volatilities on AAR Corp 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 AAR Corp with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Rolls Royce.
Diversification Opportunities for AAR Corp and Rolls Royce
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between AAR and Rolls is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding AAR 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 AAR Corp 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 AAR 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 AAR Corp i.e., AAR Corp and Rolls Royce go up and down completely randomly.
Pair Corralation between AAR Corp and Rolls Royce
Considering the 90-day investment horizon AAR Corp is expected to generate 6.53 times less return on investment than Rolls Royce. But when comparing it to its historical volatility, AAR Corp is 1.15 times less risky than Rolls Royce. It trades about 0.03 of its potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 184.00 in Rolls Royce Holdings PLC on November 27, 2024 and sell it today you would earn a total of 583.00 from holding Rolls Royce Holdings PLC or generate 316.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Rolls Royce Holdings PLC
Performance |
| Timeline |
| AAR Corp |
| Rolls Royce Holdings |
AAR Corp and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Rolls Royce
The main advantage of trading using opposite AAR Corp and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp 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.| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
| Rolls Royce vs. Rolls Royce Holdings plc | Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce vs. Embraer SA ADR |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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