Correlation Between Sembcorp Marine and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Sembcorp Marine and Rolls Royce 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 Sembcorp Marine and Rolls Royce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sembcorp Marine and Rolls Royce Holdings, you can compare the effects of market volatilities on Sembcorp Marine and Rolls Royce 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 Sembcorp Marine with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sembcorp Marine and Rolls Royce.
Diversification Opportunities for Sembcorp Marine and Rolls Royce
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sembcorp and Rolls is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Marine and Rolls Royce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings and Sembcorp Marine 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 Sembcorp Marine are associated (or correlated) with Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Sembcorp Marine i.e., Sembcorp Marine and Rolls Royce go up and down completely randomly.
Pair Corralation between Sembcorp Marine and Rolls Royce
Assuming the 90 days horizon Sembcorp Marine is expected to generate 3.6 times more return on investment than Rolls Royce. However, Sembcorp Marine is 3.6 times more volatile than Rolls Royce Holdings. It trades about 0.05 of its potential returns per unit of risk. Rolls Royce Holdings is currently generating about 0.13 per unit of risk. If you would invest 122.00 in Sembcorp Marine on November 3, 2024 and sell it today you would earn a total of 45.00 from holding Sembcorp Marine or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 87.45% |
| Values | Daily Returns |
Sembcorp Marine vs. Rolls Royce Holdings
Performance |
| Timeline |
| Sembcorp Marine |
| Rolls Royce Holdings |
Sembcorp Marine and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sembcorp Marine and Rolls Royce
The main advantage of trading using opposite Sembcorp Marine and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sembcorp Marine position performs unexpectedly, Rolls Royce 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 Rolls Royce will offset losses from the drop in Rolls Royce's long position.| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
| Rolls Royce vs. Eve Holding | Rolls Royce vs. Rolls Royce Holdings PLC | Rolls Royce vs. Sembcorp Marine | Rolls Royce vs. HEICO |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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