Correlation Between Rolls-Royce Holdings and Aerojet Rocketdyne
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and Aerojet Rocketdyne 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 Holdings and Aerojet Rocketdyne 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 Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on Rolls-Royce Holdings and Aerojet Rocketdyne 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 Holdings with a short position of Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and Aerojet Rocketdyne.
Diversification Opportunities for Rolls-Royce Holdings and Aerojet Rocketdyne
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rolls-Royce and Aerojet is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne and Rolls-Royce Holdings 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 Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Aerojet Rocketdyne go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and Aerojet Rocketdyne
If you would invest 0.36 in Rolls Royce Holdings plc on August 30, 2024 and sell it today you would earn a total of 0.01 from holding Rolls Royce Holdings plc or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. Aerojet Rocketdyne Holdings
Performance |
| Timeline |
| Rolls Royce Holdings |
| Aerojet Rocketdyne |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Rolls-Royce Holdings and Aerojet Rocketdyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and Aerojet Rocketdyne
The main advantage of trading using opposite Rolls-Royce Holdings and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.| 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 |
| Aerojet Rocketdyne vs. AAR Corp | Aerojet Rocketdyne vs. Curtiss Wright | Aerojet Rocketdyne vs. Hexcel | Aerojet Rocketdyne vs. Moog Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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