Correlation Between Rolls Royce and Enbridge
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and Enbridge 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 Enbridge 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 Enbridge, you can compare the effects of market volatilities on Rolls Royce and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Enbridge.
Diversification Opportunities for Rolls Royce and Enbridge
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rolls and Enbridge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Rolls Royce i.e., Rolls Royce and Enbridge go up and down completely randomly.
Pair Corralation between Rolls Royce and Enbridge
Assuming the 90 days trading horizon Rolls Royce Holdings PLC is expected to generate 1.85 times more return on investment than Enbridge. However, Rolls Royce is 1.85 times more volatile than Enbridge. It trades about 0.16 of its potential returns per unit of risk. Enbridge is currently generating about 0.08 per unit of risk. If you would invest 9,168 in Rolls Royce Holdings PLC on September 14, 2024 and sell it today you would earn a total of 48,372 from holding Rolls Royce Holdings PLC or generate 527.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 53.91% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Enbridge
Performance |
| Timeline |
| Rolls Royce Holdings |
| Enbridge |
Rolls Royce and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Enbridge
The main advantage of trading using opposite Rolls Royce and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Rolls Royce vs. Samsung Electronics Co | Rolls Royce vs. Samsung Electronics Co | Rolls Royce vs. Hyundai Motor | Rolls Royce vs. Toyota Motor Corp |
| Enbridge vs. Zoom Video Communications | Enbridge vs. Endo International PLC | Enbridge vs. DS Smith PLC | Enbridge vs. Rolls Royce Holdings PLC |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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