Correlation Between Rolls Royce and ASM International

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

Diversification Opportunities for Rolls Royce and ASM International

-0.53

Correlation Coefficient

Rolls Royce  ASM International

Excellent diversification

The 3 months correlation between Rolls and ASM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings plc and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Rolls Royce i.e., Rolls Royce and ASM International go up and down completely randomly.

Pair Corralation between Rolls Royce and ASM International

Assuming the 90 days horizon Rolls Royce Holdings plc is expected to generate 0.94 times more return on investment than ASM International. However, Rolls Royce Holdings plc is 1.06 times less risky than ASM International. It trades about 0.36 of its potential returns per unit of risk. ASM International NV is currently generating about 0.32 per unit of risk. If you would invest  815.00  in Rolls Royce Holdings plc on February 9, 2025 and sell it today you would earn a total of  146.00  from holding Rolls Royce Holdings plc or generate 17.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Rolls Royce Holdings plc  vs.  ASM International NV

Rolls Royce Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 9 (%) 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.

ASM International

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Rolls Royce and ASM International

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

The idea behind Rolls Royce Holdings plc and ASM International NV 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.