Correlation Between Rolls Royce and Astronics Corp

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Can any of the company-specific risk be diversified away by investing in both Rolls Royce and Astronics Corp 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 Astronics Corp 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 Astronics Corp Cl, you can compare the effects of market volatilities on Rolls Royce and Astronics Corp 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 Astronics Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Astronics Corp.

Diversification Opportunities for Rolls Royce and Astronics Corp

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Rolls and Astronics is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Astronics Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astronics Corp Cl 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 Astronics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astronics Corp Cl has no effect on the direction of Rolls Royce i.e., Rolls Royce and Astronics Corp go up and down completely randomly.

Pair Corralation between Rolls Royce and Astronics Corp

Assuming the 90 days horizon Rolls Royce is expected to generate 115.29 times less return on investment than Astronics Corp. In addition to that, Rolls Royce is 1.15 times more volatile than Astronics Corp Cl. It trades about 0.0 of its total potential returns per unit of risk. Astronics Corp Cl is currently generating about 0.06 per unit of volatility. If you would invest  867.00  in Astronics Corp Cl on August 26, 2024 and sell it today you would earn a total of  848.00  from holding Astronics Corp Cl or generate 97.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy82.7%
ValuesDaily Returns

Rolls Royce Holdings plc  vs.  Astronics Corp Cl

 Performance 
       Timeline  
Rolls Royce Holdings 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Rolls Royce Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Astronics Corp Cl 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Astronics Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Rolls Royce and Astronics Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rolls Royce and Astronics Corp

The main advantage of trading using opposite Rolls Royce and Astronics Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, Astronics Corp 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 Astronics Corp will offset losses from the drop in Astronics Corp's long position.
The idea behind Rolls Royce Holdings plc and Astronics Corp Cl 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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