Correlation Between Rolls Royce and Airbus Group
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and Airbus Group 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 Airbus Group 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 Airbus Group SE, you can compare the effects of market volatilities on Rolls Royce and Airbus Group 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Airbus Group.
Diversification Opportunities for Rolls Royce and Airbus Group
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rolls and Airbus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Rolls Royce i.e., Rolls Royce and Airbus Group go up and down completely randomly.
Pair Corralation between Rolls Royce and Airbus Group
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to generate 1.09 times more return on investment than Airbus Group. However, Rolls Royce is 1.09 times more volatile than Airbus Group SE. It trades about 0.15 of its potential returns per unit of risk. Airbus Group SE is currently generating about 0.04 per unit of risk. If you would invest 184.00 in Rolls Royce Holdings PLC on November 27, 2024 and sell it today you would earn a total of 583.00 from holding Rolls Royce Holdings PLC or generate 316.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.27% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Airbus Group SE
Performance |
| Timeline |
| Rolls Royce Holdings |
| Airbus Group SE |
Rolls Royce and Airbus Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Airbus Group
The main advantage of trading using opposite Rolls Royce and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, Airbus Group 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 Airbus Group will offset losses from the drop in Airbus Group'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 |
| Airbus Group vs. Airbus Group NV | Airbus Group vs. Park Electrochemical | Airbus Group vs. Rolls Royce Holdings PLC | Airbus Group vs. Triumph Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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