Correlation Between Ehang Holdings and Rolls Royce

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

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

Diversification Opportunities for Ehang Holdings and Rolls Royce

0.7

Correlation Coefficient

Ehang Holdings  Rolls Royce

Poor diversification

The 3 months correlation between Ehang and Rolls is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ehang Holdings 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 Ehang Holdings 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 Ehang Holdings 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 Ehang Holdings i.e., Ehang Holdings and Rolls Royce go up and down completely randomly.

Pair Corralation between Ehang Holdings and Rolls Royce

Allowing for the 90-day total investment horizon Ehang Holdings is expected to generate 3.38 times more return on investment than Rolls Royce. However, Ehang Holdings is 3.38 times more volatile than Rolls Royce Holdings PLC. It trades about 0.04 of its potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.04 per unit of risk. If you would invest  1,456  in Ehang Holdings on August 30, 2024 and sell it today you would earn a total of  43.00  from holding Ehang Holdings or generate 2.95% return on investment over 90 days.

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

Ehang Holdings  vs.  Rolls Royce Holdings PLC

Ehang Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Rolls Royce Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Rolls Royce is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ehang Holdings and Rolls Royce

The main advantage of trading using opposite Ehang Holdings and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ehang Holdings 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 Ehang Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.