Correlation Between XLMedia PLC and Rolls Royce

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

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

Diversification Opportunities for XLMedia PLC and Rolls Royce

0.29

Correlation Coefficient

XLMedia PLC  Rolls Royce

Modest diversification

The 3 months correlation between XLMedia and Rolls is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC 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 XLMedia 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 XLMedia PLC 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 XLMedia PLC i.e., XLMedia PLC and Rolls Royce go up and down completely randomly.

Pair Corralation between XLMedia PLC and Rolls Royce

Assuming the 90 days trading horizon XLMedia PLC is expected to under-perform the Rolls Royce. In addition to that, XLMedia PLC is 3.41 times more volatile than Rolls Royce Holdings PLC. It trades about -0.21 of its total potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.17 per unit of volatility. If you would invest  54,560  in Rolls Royce Holdings PLC on September 23, 2024 and sell it today you would earn a total of  2,980  from holding Rolls Royce Holdings PLC or generate 5.46% return on investment over 90 days.

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

XLMedia PLC  vs.  Rolls Royce Holdings PLC

XLMedia PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, XLMedia PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of rather uncertain basic indicators, Rolls Royce may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with XLMedia PLC and Rolls Royce

The main advantage of trading using opposite XLMedia PLC and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XLMedia PLC 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 XLMedia PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.