Correlation Between Rolls Royce and AAR Corp
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 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 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 with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and AAR Corp.
Diversification Opportunities for Rolls Royce and AAR Corp
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rolls and AAR is -0.41. 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 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 i.e., Rolls Royce and AAR Corp go up and down completely randomly.
Pair Corralation between Rolls Royce and AAR Corp
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to under-perform the AAR Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rolls Royce Holdings PLC is 1.33 times less risky than AAR Corp. The pink sheet trades about -0.15 of its potential returns per unit of risk. The AAR Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,085 in AAR Corp on August 29, 2024 and sell it today you would earn a total of 834.00 from holding AAR Corp or generate 13.71% 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. AAR Corp
Performance |
| Timeline |
| Rolls Royce Holdings |
| AAR Corp |
Rolls Royce and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and AAR Corp
The main advantage of trading using opposite Rolls Royce and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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 vs. Rolls Royce Holdings plc | Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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