Correlation Between Moog and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Moog 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 Moog and Rolls Royce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moog Inc and Rolls Royce Holdings plc, you can compare the effects of market volatilities on Moog 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 Moog with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moog and Rolls Royce.
Diversification Opportunities for Moog and Rolls Royce
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Moog and Rolls is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Moog Inc 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 Moog 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 Moog Inc 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 Moog i.e., Moog and Rolls Royce go up and down completely randomly.
Pair Corralation between Moog and Rolls Royce
Assuming the 90 days horizon Moog Inc is expected to generate 0.68 times more return on investment than Rolls Royce. However, Moog Inc is 1.48 times less risky than Rolls Royce. It trades about 0.08 of its potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about -0.04 per unit of risk. If you would invest 20,600 in Moog Inc on August 24, 2024 and sell it today you would earn a total of 867.00 from holding Moog Inc or generate 4.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moog Inc vs. Rolls Royce Holdings plc
Performance |
| Timeline |
| Moog Inc |
| Rolls Royce Holdings |
Moog and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moog and Rolls Royce
The main advantage of trading using opposite Moog and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moog 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.The idea behind Moog Inc and Rolls Royce Holdings plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Rolls Royce vs. Safran SA | Rolls Royce vs. Moog Inc | Rolls Royce vs. BAE Systems PLC | Rolls Royce vs. Airbus Group SE |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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