Correlation Between Rolls Royce and Northern Bear
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and Northern Bear 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 Northern Bear 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 Northern Bear Plc, you can compare the effects of market volatilities on Rolls Royce and Northern Bear 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 Northern Bear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Northern Bear.
Diversification Opportunities for Rolls Royce and Northern Bear
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rolls and Northern is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Northern Bear Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Bear Plc 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 Northern Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Bear Plc has no effect on the direction of Rolls Royce i.e., Rolls Royce and Northern Bear go up and down completely randomly.
Pair Corralation between Rolls Royce and Northern Bear
Assuming the 90 days trading horizon Rolls Royce Holdings PLC is expected to generate 1.22 times more return on investment than Northern Bear. However, Rolls Royce is 1.22 times more volatile than Northern Bear Plc. It trades about 0.09 of its potential returns per unit of risk. Northern Bear Plc is currently generating about -0.03 per unit of risk. If you would invest 47,320 in Rolls Royce Holdings PLC on September 19, 2024 and sell it today you would earn a total of 10,780 from holding Rolls Royce Holdings PLC or generate 22.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.88% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Northern Bear Plc
Performance |
| Timeline |
| Rolls Royce Holdings |
| Northern Bear Plc |
Rolls Royce and Northern Bear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Northern Bear
The main advantage of trading using opposite Rolls Royce and Northern Bear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, Northern Bear 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 Northern Bear will offset losses from the drop in Northern Bear'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 |
| Northern Bear vs. Summit Materials Cl | Northern Bear vs. Molson Coors Beverage | Northern Bear vs. Axway Software SA | Northern Bear vs. Ecclesiastical Insurance Office |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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