Correlation Between Airbus Group and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Airbus Group 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 Airbus Group and Rolls Royce 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, you can compare the effects of market volatilities on Airbus Group 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 Airbus Group with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Rolls Royce.
Diversification Opportunities for Airbus Group and Rolls Royce
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Airbus and Rolls is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Airbus Group NV and Rolls Royce Holdings 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. 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 go up and down completely randomly.
Pair Corralation between Airbus Group and Rolls Royce
Assuming the 90 days horizon Airbus Group NV is expected to generate 0.97 times more return on investment than Rolls Royce. However, Airbus Group NV is 1.04 times less risky than Rolls Royce. It trades about -0.15 of its potential returns per unit of risk. Rolls Royce Holdings is currently generating about -0.21 per unit of risk. If you would invest 3,785 in Airbus Group NV on August 29, 2024 and sell it today you would lose (219.00) from holding Airbus Group NV or give up 5.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airbus Group NV vs. Rolls Royce Holdings
Performance |
| Timeline |
| Airbus Group NV |
| Rolls Royce Holdings |
Airbus Group and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airbus Group and Rolls Royce
The main advantage of trading using opposite Airbus Group and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbus Group 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.| Airbus Group vs. Safran SA | Airbus Group vs. Moog Inc | Airbus Group vs. BAE Systems PLC | Airbus Group vs. Airbus Group SE |
| Rolls Royce vs. Eve Holding | Rolls Royce vs. Rolls Royce Holdings PLC | Rolls Royce vs. Sembcorp Marine | Rolls Royce vs. HEICO |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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