Correlation Between Rolls Royce and Singapore Technologies
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and Singapore Technologies 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 Singapore Technologies 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 Singapore Technologies Engineering, you can compare the effects of market volatilities on Rolls Royce and Singapore Technologies 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 Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Singapore Technologies.
Diversification Opportunities for Rolls Royce and Singapore Technologies
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rolls and Singapore is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies 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 Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of Rolls Royce i.e., Rolls Royce and Singapore Technologies go up and down completely randomly.
Pair Corralation between Rolls Royce and Singapore Technologies
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to generate 0.87 times more return on investment than Singapore Technologies. However, Rolls Royce Holdings PLC is 1.15 times less risky than Singapore Technologies. It trades about 0.15 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about 0.06 per unit of risk. If you would invest 372.00 in Rolls Royce Holdings PLC on September 12, 2024 and sell it today you would earn a total of 369.00 from holding Rolls Royce Holdings PLC or generate 99.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 60.73% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Singapore Technologies Enginee
Performance |
| Timeline |
| Rolls Royce Holdings |
| Singapore Technologies |
Rolls Royce and Singapore Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Singapore Technologies
The main advantage of trading using opposite Rolls Royce and Singapore Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, Singapore Technologies 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 Singapore Technologies will offset losses from the drop in Singapore Technologies' 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 |
| Singapore Technologies vs. Rolls Royce Holdings PLC | Singapore Technologies vs. VirTra Inc | Singapore Technologies vs. BWX Technologies | Singapore Technologies vs. Embraer SA ADR |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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