Correlation Between Rolls Royce and SINGAPORE EXUNSPADR15

Can any of the company-specific risk be diversified away by investing in both Rolls Royce and SINGAPORE EXUNSPADR15 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 and SINGAPORE EXUNSPADR15 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 SINGAPORE EXUNSPADR15, you can compare the effects of market volatilities on Rolls Royce and SINGAPORE EXUNSPADR15 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 with a short position of SINGAPORE EXUNSPADR15. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and SINGAPORE EXUNSPADR15.

Diversification Opportunities for Rolls Royce and SINGAPORE EXUNSPADR15

0.67

Correlation Coefficient

Rolls Royce  SINGAPORE EXUNSPADR15

Poor diversification

The 3 months correlation between Rolls and SINGAPORE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and SINGAPORE EXUNSPADR15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINGAPORE EXUNSPADR15 and Rolls Royce 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 SINGAPORE EXUNSPADR15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINGAPORE EXUNSPADR15 has no effect on the direction of Rolls Royce i.e., Rolls Royce and SINGAPORE EXUNSPADR15 go up and down completely randomly.

Pair Corralation between Rolls Royce and SINGAPORE EXUNSPADR15

Assuming the 90 days horizon Rolls Royce Holdings plc is expected to generate 1.69 times more return on investment than SINGAPORE EXUNSPADR15. However, Rolls Royce is 1.69 times more volatile than SINGAPORE EXUNSPADR15. It trades about 0.16 of its potential returns per unit of risk. SINGAPORE EXUNSPADR15 is currently generating about 0.11 per unit of risk. If you would invest  104.00  in Rolls Royce Holdings plc on September 15, 2024 and sell it today you would earn a total of  605.00  from holding Rolls Royce Holdings plc or generate 581.73% return on investment over 90 days.

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

Rolls Royce Holdings plc  vs.  SINGAPORE EXUNSPADR15

Rolls Royce Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rolls Royce reported solid returns over the last few months and may actually be approaching a breakup point.

SINGAPORE EXUNSPADR15

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SINGAPORE EXUNSPADR15 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SINGAPORE EXUNSPADR15 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rolls Royce and SINGAPORE EXUNSPADR15

The main advantage of trading using opposite Rolls Royce and SINGAPORE EXUNSPADR15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce position performs unexpectedly, SINGAPORE EXUNSPADR15 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 SINGAPORE EXUNSPADR15 will offset losses from the drop in SINGAPORE EXUNSPADR15's long position.

The idea behind Rolls Royce Holdings plc and SINGAPORE EXUNSPADR15 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.