Correlation Between Rolls-Royce Holdings and Varta AG
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and Varta AG 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 Varta AG 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 Varta AG, you can compare the effects of market volatilities on Rolls-Royce Holdings and Varta AG 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 Varta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and Varta AG.
Diversification Opportunities for Rolls-Royce Holdings and Varta AG
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rolls-Royce and Varta is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Varta AG go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and Varta AG
Assuming the 90 days horizon Rolls-Royce Holdings is expected to generate 3.09 times less return on investment than Varta AG. But when comparing it to its historical volatility, Rolls Royce Holdings plc is 5.36 times less risky than Varta AG. It trades about 0.28 of its potential returns per unit of risk. Varta AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Varta AG on December 1, 2024 and sell it today you would earn a total of 47.00 from holding Varta AG or generate 51.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rolls Royce Holdings plc vs. Varta AG
Performance |
| Timeline |
| Rolls Royce Holdings |
| Varta AG |
Rolls-Royce Holdings and Varta AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and Varta AG
The main advantage of trading using opposite Rolls-Royce Holdings and Varta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, Varta AG 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 Varta AG will offset losses from the drop in Varta AG's long position.| Rolls-Royce Holdings vs. SCIENCE IN SPORT | Rolls-Royce Holdings vs. DICKS Sporting Goods | Rolls-Royce Holdings vs. British American Tobacco | Rolls-Royce Holdings vs. Air Transport Services |
| Varta AG vs. MIRAMAR HOTEL INV | Varta AG vs. EMPEROR ENT HOTEL | Varta AG vs. PPHE HOTEL GROUP | Varta AG vs. INVITATION HOMES DL |
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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