Correlation Between Rotork Plc and Hensoldt

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

By analyzing existing cross correlation between Rotork plc and Hensoldt AG, you can compare the effects of market volatilities on Rotork Plc and Hensoldt 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 Rotork Plc with a short position of Hensoldt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rotork Plc and Hensoldt.

Diversification Opportunities for Rotork Plc and Hensoldt

0.12

Correlation Coefficient

Rotork Plc  Hensoldt

Average diversification

The 3 months correlation between Rotork and Hensoldt is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rotork plc and Hensoldt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensoldt AG and Rotork Plc 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 Rotork plc are associated (or correlated) with Hensoldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensoldt AG has no effect on the direction of Rotork Plc i.e., Rotork Plc and Hensoldt go up and down completely randomly.

Pair Corralation between Rotork Plc and Hensoldt

Assuming the 90 days horizon Rotork plc is expected to under-perform the Hensoldt. In addition to that, Rotork Plc is 2.05 times more volatile than Hensoldt AG. It trades about -0.03 of its total potential returns per unit of risk. Hensoldt AG is currently generating about 0.05 per unit of volatility. If you would invest  3,470  in Hensoldt AG on October 10, 2024 and sell it today you would earn a total of  230.00  from holding Hensoldt AG or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Rotork plc  vs.  Hensoldt AG

Rotork plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rotork plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hensoldt AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hensoldt AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Hensoldt may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rotork Plc and Hensoldt

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

The idea behind Rotork plc and Hensoldt AG 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.