Correlation Between Rolls Royce and AAC Clyde
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and AAC Clyde 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 Rolls Royce and AAC Clyde into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings plc and AAC Clyde Space, you can compare the effects of market volatilities on Rolls Royce and AAC Clyde 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 Rolls Royce with a short position of AAC Clyde. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and AAC Clyde.
Diversification Opportunities for Rolls Royce and AAC Clyde
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rolls and AAC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and AAC Clyde Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Clyde Space and Rolls Royce 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 Rolls Royce Holdings plc are associated (or correlated) with AAC Clyde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Clyde Space has no effect on the direction of Rolls Royce i.e., Rolls Royce and AAC Clyde go up and down completely randomly.
Pair Corralation between Rolls Royce and AAC Clyde
Assuming the 90 days horizon Rolls Royce is expected to generate 57.72 times less return on investment than AAC Clyde. But when comparing it to its historical volatility, Rolls Royce Holdings plc is 8.24 times less risky than AAC Clyde. It trades about 0.01 of its potential returns per unit of risk. AAC Clyde Space is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 12.00 in AAC Clyde Space on September 14, 2024 and sell it today you would earn a total of 398.00 from holding AAC Clyde Space or generate 3316.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. AAC Clyde Space
Performance |
| Timeline |
| Rolls Royce Holdings |
| AAC Clyde Space |
Rolls Royce and AAC Clyde Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and AAC Clyde
The main advantage of trading using opposite Rolls Royce and AAC Clyde positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, AAC Clyde 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 AAC Clyde will offset losses from the drop in AAC Clyde's long position.| Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce vs. Embraer SA ADR | Rolls Royce vs. HEICO |
| AAC Clyde vs. VirTra Inc | AAC Clyde vs. BWX Technologies | AAC Clyde vs. Embraer SA ADR | AAC Clyde 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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