Correlation Between Amundi Label and Rolls Royce

Can any of the company-specific risk be diversified away by investing in both Amundi Label 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 Amundi Label and Rolls Royce 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 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amundi Label and Rolls Royce.

Diversification Opportunities for Amundi Label and Rolls Royce

0.09

Correlation Coefficient

Amundi Label  Rolls Royce

Significant diversification

The 3 months correlation between Amundi and Rolls is 0.09. 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. 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 go up and down completely randomly.

Pair Corralation between Amundi Label and Rolls Royce

Assuming the 90 days trading horizon Amundi Label Actions is expected to under-perform the Rolls Royce. But the fund apears to be less risky and, when comparing its historical volatility, Amundi Label Actions is 2.99 times less risky than Rolls Royce. The fund trades about -0.03 of its potential returns per unit of risk. The Rolls Royce Holdings plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  632.00  in Rolls Royce Holdings plc on October 6, 2024 and sell it today you would earn a total of  85.00  from holding Rolls Royce Holdings plc or generate 13.45% return on investment 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Rolls Royce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amundi Label and Rolls Royce

The main advantage of trading using opposite Amundi Label and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amundi Label 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.

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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.