Correlation Between AAC Clyde and Rolls Royce

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

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

Diversification Opportunities for AAC Clyde and Rolls Royce

0.06

Correlation Coefficient

AAC Clyde  Rolls Royce

Significant diversification

The 3 months correlation between AAC and Rolls is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space 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 AAC Clyde 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 AAC Clyde Space 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 AAC Clyde i.e., AAC Clyde and Rolls Royce go up and down completely randomly.

Pair Corralation between AAC Clyde and Rolls Royce

Assuming the 90 days horizon AAC Clyde Space is expected to generate 1.73 times more return on investment than Rolls Royce. However, AAC Clyde is 1.73 times more volatile than Rolls Royce Holdings. It trades about 0.13 of its potential returns per unit of risk. Rolls Royce Holdings is currently generating about 0.09 per unit of risk. If you would invest  323.00  in AAC Clyde Space on September 16, 2024 and sell it today you would earn a total of  87.00  from holding AAC Clyde Space or generate 26.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

AAC Clyde Space  vs.  Rolls Royce Holdings

AAC Clyde Space

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, AAC Clyde reported solid returns over the last few months and may actually be approaching a breakup point.

Rolls Royce Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Rolls Royce may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AAC Clyde and Rolls Royce

The main advantage of trading using opposite AAC Clyde and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAC Clyde 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 AAC Clyde Space and Rolls Royce Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.