Correlation Between Thales SA and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Thales SA 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 Thales SA and Rolls Royce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thales SA and Rolls Royce Holdings PLC, you can compare the effects of market volatilities on Thales SA 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 Thales SA with a short position of Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Rolls Royce.
Diversification Opportunities for Thales SA and Rolls Royce
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Thales and Rolls is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Rolls Royce Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings and Thales SA 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 Thales SA 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 Thales SA i.e., Thales SA and Rolls Royce go up and down completely randomly.
Pair Corralation between Thales SA and Rolls Royce
Assuming the 90 days horizon Thales SA is expected to under-perform the Rolls Royce. But the pink sheet apears to be less risky and, when comparing its historical volatility, Thales SA is 1.7 times less risky than Rolls Royce. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Rolls Royce Holdings PLC is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 731.00 in Rolls Royce Holdings PLC on August 29, 2024 and sell it today you would lose (54.00) from holding Rolls Royce Holdings PLC or give up 7.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thales SA vs. Rolls Royce Holdings PLC
Performance |
| Timeline |
| Thales SA |
| Rolls Royce Holdings |
Thales SA and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thales SA and Rolls Royce
The main advantage of trading using opposite Thales SA and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thales SA 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.| Thales SA vs. MTU Aero Engines | Thales SA vs. Singapore Technologies Engineering | Thales SA vs. Safran SA | Thales SA vs. Thales SA ADR |
| Rolls Royce vs. Rolls Royce Holdings plc | Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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