Correlation Between Leonardo SpA and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Leonardo SpA 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 Leonardo SpA and Rolls Royce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leonardo SpA ADR and Rolls Royce Holdings plc, you can compare the effects of market volatilities on Leonardo SpA 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 Leonardo SpA with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo SpA and Rolls Royce.
Diversification Opportunities for Leonardo SpA and Rolls Royce
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leonardo and Rolls is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo SpA ADR 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 Leonardo SpA 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 Leonardo SpA ADR 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 Leonardo SpA i.e., Leonardo SpA and Rolls Royce go up and down completely randomly.
Pair Corralation between Leonardo SpA and Rolls Royce
Assuming the 90 days horizon Leonardo SpA ADR is expected to generate 0.27 times more return on investment than Rolls Royce. However, Leonardo SpA ADR is 3.75 times less risky than Rolls Royce. It trades about 0.09 of its potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about -0.22 per unit of risk. If you would invest 1,323 in Leonardo SpA ADR on October 10, 2024 and sell it today you would earn a total of 23.00 from holding Leonardo SpA ADR or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leonardo SpA ADR vs. Rolls Royce Holdings plc
Performance |
| Timeline |
| Leonardo SpA ADR |
| Rolls Royce Holdings |
Leonardo SpA and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leonardo SpA and Rolls Royce
The main advantage of trading using opposite Leonardo SpA and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leonardo SpA 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.| Leonardo SpA vs. Leonardo Spa | Leonardo SpA vs. Thales SA ADR | Leonardo SpA vs. Safran SA | Leonardo SpA vs. Rheinmetall AG ADR |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |