Correlation Between Rolls Royce and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 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 and Sembcorp Marine, you can compare the effects of market volatilities on Rolls Royce 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 with a short position of Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Sembcorp Marine.
Diversification Opportunities for Rolls Royce and Sembcorp Marine
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rolls and Sembcorp is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings 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 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 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 i.e., Rolls Royce and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Rolls Royce and Sembcorp Marine
Assuming the 90 days horizon Rolls Royce is expected to generate 203.95 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, Rolls Royce Holdings is 116.65 times less risky than Sembcorp Marine. It trades about 0.16 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Sembcorp Marine on August 25, 2024 and sell it today you would earn a total of 129.00 from holding Sembcorp Marine or generate 1172.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.48% |
| Values | Daily Returns |
Rolls Royce Holdings vs. Sembcorp Marine
Performance |
| Timeline |
| Rolls Royce Holdings |
| Sembcorp Marine |
Rolls Royce and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Sembcorp Marine
The main advantage of trading using opposite Rolls Royce and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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 vs. Eve Holding | Rolls Royce vs. Rolls Royce Holdings PLC | Rolls Royce vs. Sembcorp Marine | Rolls Royce vs. HEICO |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |