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 NV, 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
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Rolls and Airbus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Airbus Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group NV 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 NV 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 under-perform the Airbus Group. In addition to that, Rolls Royce is 1.28 times more volatile than Airbus Group NV. It trades about -0.15 of its total potential returns per unit of risk. Airbus Group NV is currently generating about -0.15 per unit of volatility. If you would invest 3,785 in Airbus Group NV on August 29, 2024 and sell it today you would lose (219.00) from holding Airbus Group NV or give up 5.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Airbus Group NV
Performance |
| Timeline |
| Rolls Royce Holdings |
| Airbus Group NV |
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. Safran SA | Airbus Group vs. Moog Inc | Airbus Group vs. BAE Systems PLC | Airbus Group vs. Airbus Group SE |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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