Correlation Between Rolls-Royce Holdings and AAR Corp
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and AAR Corp 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 AAR Corp 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 AAR Corp, you can compare the effects of market volatilities on Rolls-Royce Holdings and AAR Corp 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 AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and AAR Corp.
Diversification Opportunities for Rolls-Royce Holdings and AAR Corp
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rolls-Royce and AAR is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp 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 AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and AAR Corp go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and AAR Corp
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to generate 0.85 times more return on investment than AAR Corp. However, Rolls Royce Holdings PLC is 1.18 times less risky than AAR Corp. It trades about 0.08 of its potential returns per unit of risk. AAR Corp is currently generating about 0.01 per unit of risk. If you would invest 591.00 in Rolls Royce Holdings PLC on August 31, 2024 and sell it today you would earn a total of 122.00 from holding Rolls Royce Holdings PLC or generate 20.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. AAR Corp
Performance |
| Timeline |
| Rolls Royce Holdings |
| AAR Corp |
Rolls-Royce Holdings and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and AAR Corp
The main advantage of trading using opposite Rolls-Royce Holdings and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp'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 |
| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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