Correlation Between Archer Aviation and Rolls Royce

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

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

Diversification Opportunities for Archer Aviation and Rolls Royce

0.44

Correlation Coefficient

Archer Aviation  Rolls Royce

Very weak diversification

The 3 months correlation between Archer and Rolls is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Archer Aviation 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 Archer Aviation 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 Archer Aviation 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 Archer Aviation i.e., Archer Aviation and Rolls Royce go up and down completely randomly.

Pair Corralation between Archer Aviation and Rolls Royce

Given the investment horizon of 90 days Archer Aviation is expected to under-perform the Rolls Royce. In addition to that, Archer Aviation is 4.48 times more volatile than Rolls Royce Holdings PLC. It trades about -0.01 of its total potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.11 per unit of volatility. If you would invest  710.00  in Rolls Royce Holdings PLC on November 28, 2024 and sell it today you would earn a total of  76.00  from holding Rolls Royce Holdings PLC or generate 10.7% return on investment over 90 days.

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

Archer Aviation  vs.  Rolls Royce Holdings PLC

Archer Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Archer Aviation is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Rolls Royce Holdings

Risk-Adjusted Performance

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 fragile technical and fundamental indicators, Rolls Royce may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Archer Aviation and Rolls Royce

The main advantage of trading using opposite Archer Aviation and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Aviation 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 Archer Aviation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.