Correlation Between Astrotech Corp and Rolls Royce

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

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

Diversification Opportunities for Astrotech Corp and Rolls Royce

0.55

Correlation Coefficient

Astrotech Corp  Rolls Royce

Very weak diversification

The 3 months correlation between Astrotech and Rolls is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Astrotech Corp 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 Astrotech Corp 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 Astrotech Corp 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 Astrotech Corp i.e., Astrotech Corp and Rolls Royce go up and down completely randomly.

Pair Corralation between Astrotech Corp and Rolls Royce

Given the investment horizon of 90 days Astrotech Corp is expected to under-perform the Rolls Royce. In addition to that, Astrotech Corp is 1.75 times more volatile than Rolls Royce Holdings. It trades about 0.0 of its total potential returns per unit of risk. Rolls Royce Holdings is currently generating about 0.29 per unit of volatility. If you would invest  525.00  in Rolls Royce Holdings on March 5, 2024 and sell it today you would earn a total of  49.00  from holding Rolls Royce Holdings or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Astrotech Corp  vs.  Rolls Royce Holdings

Astrotech Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astrotech Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Astrotech Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rolls Royce Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings are ranked lower than 13 (%) 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 Astrotech Corp and Rolls Royce

The main advantage of trading using opposite Astrotech Corp and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astrotech Corp 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 Astrotech Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.