Correlation Between Astronics and Rocket Lab
Can any of the company-specific risk be diversified away by investing in both Astronics and Rocket Lab 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 Astronics and Rocket Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astronics and Rocket Lab USA, you can compare the effects of market volatilities on Astronics and Rocket Lab 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 Astronics with a short position of Rocket Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astronics and Rocket Lab.
Diversification Opportunities for Astronics and Rocket Lab
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Astronics and Rocket is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Astronics and Rocket Lab USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Lab USA and Astronics 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 Astronics are associated (or correlated) with Rocket Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Lab USA has no effect on the direction of Astronics i.e., Astronics and Rocket Lab go up and down completely randomly.
Pair Corralation between Astronics and Rocket Lab
Given the investment horizon of 90 days Astronics is expected to under-perform the Rocket Lab. But the stock apears to be less risky and, when comparing its historical volatility, Astronics is 1.68 times less risky than Rocket Lab. The stock trades about -0.08 of its potential returns per unit of risk. The Rocket Lab USA is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 1,125 in Rocket Lab USA on September 5, 2024 and sell it today you would earn a total of 1,176 from holding Rocket Lab USA or generate 104.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Astronics vs. Rocket Lab USA
Performance |
| Timeline |
| Astronics |
| Rocket Lab USA |
Astronics and Rocket Lab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astronics and Rocket Lab
The main advantage of trading using opposite Astronics and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astronics position performs unexpectedly, Rocket Lab 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 Rocket Lab will offset losses from the drop in Rocket Lab's long position.The idea behind Astronics and Rocket Lab USA 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.| Rocket Lab vs. Lilium NV | Rocket Lab vs. Archer Aviation | Rocket Lab vs. Ehang Holdings | Rocket Lab vs. Vertical Aerospace |
Check out your portfolio center.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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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