Correlation Between Sabre Insurance and Rolls-Royce Holdings

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

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

Diversification Opportunities for Sabre Insurance and Rolls-Royce Holdings

-0.71

Correlation Coefficient

Sabre Insurance  Rolls-Royce Holdings

Pay attention - limited upside

The 3 months correlation between Sabre and Rolls-Royce is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group 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 Sabre Insurance 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 Sabre Insurance Group are associated (or correlated) with Rolls-Royce Holdings. 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 Sabre Insurance i.e., Sabre Insurance and Rolls-Royce Holdings go up and down completely randomly.

Pair Corralation between Sabre Insurance and Rolls-Royce Holdings

Assuming the 90 days trading horizon Sabre Insurance Group is expected to under-perform the Rolls-Royce Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Sabre Insurance Group is 2.11 times less risky than Rolls-Royce Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Rolls Royce Holdings PLC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  57,560  in Rolls Royce Holdings PLC on December 21, 2024 and sell it today you would earn a total of  22,100  from holding Rolls Royce Holdings PLC or generate 38.39% return on investment over 90 days.

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

Sabre Insurance Group  vs.  Rolls Royce Holdings PLC

Sabre Insurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Rolls Royce Holdings

Risk-Adjusted Performance

Good

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

Pair Trading with Sabre Insurance and Rolls-Royce Holdings

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

The idea behind Sabre Insurance Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.