Correlation Between Rolls-Royce Holdings and MTU Aero
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and MTU Aero 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 MTU Aero 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 MTU Aero Engines, you can compare the effects of market volatilities on Rolls-Royce Holdings and MTU Aero 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 MTU Aero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and MTU Aero.
Diversification Opportunities for Rolls-Royce Holdings and MTU Aero
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rolls-Royce and MTU is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and MTU Aero Engines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTU Aero Engines 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 MTU Aero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTU Aero Engines has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and MTU Aero go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and MTU Aero
Assuming the 90 days horizon Rolls-Royce Holdings is expected to generate 6.95 times less return on investment than MTU Aero. In addition to that, Rolls-Royce Holdings is 1.58 times more volatile than MTU Aero Engines. It trades about 0.01 of its total potential returns per unit of risk. MTU Aero Engines is currently generating about 0.08 per unit of volatility. If you would invest 25,000 in MTU Aero Engines on September 2, 2024 and sell it today you would earn a total of 8,109 from holding MTU Aero Engines or generate 32.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. MTU Aero Engines
Performance |
| Timeline |
| Rolls Royce Holdings |
| MTU Aero Engines |
Rolls-Royce Holdings and MTU Aero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and MTU Aero
The main advantage of trading using opposite Rolls-Royce Holdings and MTU Aero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, MTU Aero 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 MTU Aero will offset losses from the drop in MTU Aero'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 |
| MTU Aero vs. Firan Technology Group | MTU Aero vs. 808 Renewable Energy | MTU Aero vs. Park Electrochemical | MTU Aero vs. Innovative Solutions and |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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