Correlation Between Lilium NV and Rolls Royce

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

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

Diversification Opportunities for Lilium NV and Rolls Royce

-0.75

Correlation Coefficient

Lilium NV  Rolls Royce

Pay attention - limited upside

The 3 months correlation between Lilium and Rolls is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV 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 Lilium NV 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 Lilium NV 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 Lilium NV i.e., Lilium NV and Rolls Royce go up and down completely randomly.

Pair Corralation between Lilium NV and Rolls Royce

Given the investment horizon of 90 days Lilium NV is expected to under-perform the Rolls Royce. In addition to that, Lilium NV is 5.05 times more volatile than Rolls Royce Holdings. It trades about -0.04 of its total potential returns per unit of risk. Rolls Royce Holdings is currently generating about 0.2 per unit of volatility. If you would invest  714.00  in Rolls Royce Holdings on December 29, 2024 and sell it today you would earn a total of  292.00  from holding Rolls Royce Holdings or generate 40.9% return on investment over 90 days.

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

Lilium NV  vs.  Rolls Royce Holdings

Lilium NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lilium NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rolls Royce Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Rolls Royce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lilium NV and Rolls Royce

The main advantage of trading using opposite Lilium NV and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lilium NV 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 Lilium NV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.