Correlation Between Amundi Label and Rolls-Royce Holdings

Can any of the company-specific risk be diversified away by investing in both Amundi Label and Rolls-Royce Holdings 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 Amundi Label and Rolls-Royce Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amundi Label Actions and Rolls Royce Holdings plc, you can compare the effects of market volatilities on Amundi Label and Rolls-Royce Holdings 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 Amundi Label with a short position of Rolls-Royce Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amundi Label and Rolls-Royce Holdings.

Diversification Opportunities for Amundi Label and Rolls-Royce Holdings

0.1

Correlation Coefficient

Amundi Label  Rolls-Royce Holdings

Average diversification

The 3 months correlation between Amundi and Rolls-Royce is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Amundi Label Actions 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 Amundi Label 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 Amundi Label Actions are associated (or correlated) with Rolls-Royce Holdings. 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 Amundi Label i.e., Amundi Label and Rolls-Royce Holdings go up and down completely randomly.

Pair Corralation between Amundi Label and Rolls-Royce Holdings

Assuming the 90 days trading horizon Amundi Label Actions is expected to generate 0.47 times more return on investment than Rolls-Royce Holdings. However, Amundi Label Actions is 2.14 times less risky than Rolls-Royce Holdings. It trades about 0.0 of its potential returns per unit of risk. Rolls Royce Holdings plc is currently generating about -0.14 per unit of risk. If you would invest  29,987  in Amundi Label Actions on October 4, 2024 and sell it today you would lose (12.00) from holding Amundi Label Actions or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amundi Label Actions  vs.  Rolls Royce Holdings plc

Amundi Label Actions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amundi Label Actions has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Amundi Label is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rolls Royce Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rolls-Royce Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Amundi Label and Rolls-Royce Holdings

The main advantage of trading using opposite Amundi Label and Rolls-Royce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amundi Label position performs unexpectedly, Rolls-Royce Holdings 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 Holdings will offset losses from the drop in Rolls-Royce Holdings' long position.

The idea behind Amundi Label Actions and Rolls Royce Holdings plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.