Correlation Between Airbus Group and Rolls-Royce Holdings
Can any of the company-specific risk be diversified away by investing in both Airbus Group and Rolls-Royce Holdings 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 Airbus Group and Rolls-Royce Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airbus Group NV and Rolls Royce Holdings PLC, you can compare the effects of market volatilities on Airbus Group and Rolls-Royce Holdings 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 Airbus Group with a short position of Rolls-Royce Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Rolls-Royce Holdings.
Diversification Opportunities for Airbus Group and Rolls-Royce Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Airbus and Rolls-Royce is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group NV 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 Airbus Group 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 Airbus Group NV are associated (or correlated) with Rolls-Royce Holdings. 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 Airbus Group i.e., Airbus Group and Rolls-Royce Holdings go up and down completely randomly.
Pair Corralation between Airbus Group and Rolls-Royce Holdings
Assuming the 90 days horizon Airbus Group NV is expected to generate 0.72 times more return on investment than Rolls-Royce Holdings. However, Airbus Group NV is 1.38 times less risky than Rolls-Royce Holdings. It trades about 0.24 of its potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.12 per unit of risk. If you would invest 4,087 in Airbus Group NV on November 2, 2024 and sell it today you would earn a total of 232.00 from holding Airbus Group NV or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airbus Group NV vs. Rolls Royce Holdings PLC
Performance |
| Timeline |
| Airbus Group NV |
| Rolls Royce Holdings |
Airbus Group and Rolls-Royce Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airbus Group and Rolls-Royce Holdings
The main advantage of trading using opposite Airbus Group and Rolls-Royce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus Group position performs unexpectedly, Rolls-Royce Holdings 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 Holdings will offset losses from the drop in Rolls-Royce Holdings' long position.| Airbus Group vs. Safran SA | Airbus Group vs. Moog Inc | Airbus Group vs. BAE Systems PLC | Airbus Group vs. Airbus Group SE |
| Rolls-Royce Holdings vs. Rolls Royce Holdings plc | Rolls-Royce Holdings vs. VirTra Inc | Rolls-Royce Holdings vs. BWX Technologies | Rolls-Royce Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |