Correlation Between Rolls-Royce Holdings and Airbus Group
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and Airbus Group 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 Airbus Group 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 Airbus Group SE, you can compare the effects of market volatilities on Rolls-Royce Holdings and Airbus Group 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and Airbus Group.
Diversification Opportunities for Rolls-Royce Holdings and Airbus Group
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rolls-Royce and Airbus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Airbus Group go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and Airbus Group
Assuming the 90 days horizon Rolls Royce Holdings plc is expected to generate 1.88 times more return on investment than Airbus Group. However, Rolls-Royce Holdings is 1.88 times more volatile than Airbus Group SE. It trades about -0.04 of its potential returns per unit of risk. Airbus Group SE is currently generating about -0.12 per unit of risk. If you would invest 0.37 in Rolls Royce Holdings plc on August 29, 2024 and sell it today you would lose (0.02) from holding Rolls Royce Holdings plc or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. Airbus Group SE
Performance |
| Timeline |
| Rolls Royce Holdings |
| Airbus Group SE |
Rolls-Royce Holdings and Airbus Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and Airbus Group
The main advantage of trading using opposite Rolls-Royce Holdings and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, Airbus Group 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 Airbus Group will offset losses from the drop in Airbus Group's long position.| Rolls-Royce Holdings vs. Airbus Group NV | Rolls-Royce Holdings vs. Park Electrochemical | Rolls-Royce Holdings vs. Rolls Royce Holdings PLC | Rolls-Royce Holdings vs. Triumph Group |
| Airbus Group vs. Airbus Group NV | Airbus Group vs. Park Electrochemical | Airbus Group vs. Rolls Royce Holdings PLC | Airbus Group vs. Triumph Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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