Correlation Between Rolls-Royce Holdings and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Rolls-Royce Holdings and Sembcorp Marine 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 Sembcorp Marine 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 Sembcorp Marine, you can compare the effects of market volatilities on Rolls-Royce Holdings and Sembcorp Marine 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 Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls-Royce Holdings and Sembcorp Marine.
Diversification Opportunities for Rolls-Royce Holdings and Sembcorp Marine
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rolls-Royce and Sembcorp is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine 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 Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Rolls-Royce Holdings and Sembcorp Marine
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to under-perform the Sembcorp Marine. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rolls Royce Holdings PLC is 2.86 times less risky than Sembcorp Marine. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Sembcorp Marine is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 151.00 in Sembcorp Marine on August 29, 2024 and sell it today you would lose (4.00) from holding Sembcorp Marine or give up 2.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Sembcorp Marine
Performance |
| Timeline |
| Rolls Royce Holdings |
| Sembcorp Marine |
Rolls-Royce Holdings and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls-Royce Holdings and Sembcorp Marine
The main advantage of trading using opposite Rolls-Royce Holdings and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine'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 |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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