Correlation Between Rolls Royce and CPI Aerostructures
Can any of the company-specific risk be diversified away by investing in both Rolls Royce and CPI Aerostructures 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 CPI Aerostructures into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings and CPI Aerostructures, you can compare the effects of market volatilities on Rolls Royce and CPI Aerostructures 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 CPI Aerostructures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and CPI Aerostructures.
Diversification Opportunities for Rolls Royce and CPI Aerostructures
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rolls and CPI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings and CPI Aerostructures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Aerostructures 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 are associated (or correlated) with CPI Aerostructures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Aerostructures has no effect on the direction of Rolls Royce i.e., Rolls Royce and CPI Aerostructures go up and down completely randomly.
Pair Corralation between Rolls Royce and CPI Aerostructures
Assuming the 90 days horizon Rolls Royce Holdings is expected to under-perform the CPI Aerostructures. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rolls Royce Holdings is 2.71 times less risky than CPI Aerostructures. The pink sheet trades about -0.21 of its potential returns per unit of risk. The CPI Aerostructures is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 345.00 in CPI Aerostructures on August 29, 2024 and sell it today you would earn a total of 33.00 from holding CPI Aerostructures or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rolls Royce Holdings vs. CPI Aerostructures
Performance |
| Timeline |
| Rolls Royce Holdings |
| CPI Aerostructures |
Rolls Royce and CPI Aerostructures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and CPI Aerostructures
The main advantage of trading using opposite Rolls Royce and CPI Aerostructures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, CPI Aerostructures 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 CPI Aerostructures will offset losses from the drop in CPI Aerostructures' long position.| Rolls Royce vs. Eve Holding | Rolls Royce vs. Rolls Royce Holdings PLC | Rolls Royce vs. Sembcorp Marine | Rolls Royce vs. HEICO |
| CPI Aerostructures vs. ABIVAX Socit Anonyme | CPI Aerostructures vs. Morningstar Unconstrained Allocation | CPI Aerostructures vs. SPACE | CPI Aerostructures vs. Knife River |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |