Correlation Between Rolls-Royce Holdings and Amundi Label

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

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

Diversification Opportunities for Rolls-Royce Holdings and Amundi Label

0.1

Correlation Coefficient

Rolls-Royce Holdings  Amundi Label

Average diversification

The 3 months correlation between Rolls-Royce and Amundi is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and Amundi Label Actions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Label Actions and Rolls-Royce 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 Rolls Royce Holdings plc are associated (or correlated) with Amundi Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Label Actions has no effect on the direction of Rolls-Royce Holdings i.e., Rolls-Royce Holdings and Amundi Label go up and down completely randomly.

Pair Corralation between Rolls-Royce Holdings and Amundi Label

Assuming the 90 days horizon Rolls Royce Holdings plc is expected to under-perform the Amundi Label. In addition to that, Rolls-Royce Holdings is 2.14 times more volatile than Amundi Label Actions. It trades about -0.14 of its total potential returns per unit of risk. Amundi Label Actions is currently generating about 0.0 per unit of volatility. If you would invest  29,987  in Amundi Label Actions on October 4, 2024 and sell it today you would lose (12.00) from holding Amundi Label Actions or give up 0.04% of portfolio value over 90 days.

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

Rolls Royce Holdings plc  vs.  Amundi Label Actions

Rolls Royce Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rolls-Royce Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Rolls-Royce Holdings and Amundi Label

The main advantage of trading using opposite Rolls-Royce Holdings and Amundi Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls-Royce Holdings position performs unexpectedly, Amundi Label 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 Amundi Label will offset losses from the drop in Amundi Label's long position.

The idea behind Rolls Royce Holdings plc and Amundi Label Actions 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.