Correlation Between Rocket Lab and AAR Corp
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and AAR Corp 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 Rocket Lab and AAR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Lab USA and AAR Corp, you can compare the effects of market volatilities on Rocket Lab and AAR Corp 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 Rocket Lab with a short position of AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and AAR Corp.
Diversification Opportunities for Rocket Lab and AAR Corp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Rocket and AAR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and Rocket Lab 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 Rocket Lab USA are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Rocket Lab i.e., Rocket Lab and AAR Corp go up and down completely randomly.
Pair Corralation between Rocket Lab and AAR Corp
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 5.98 times more return on investment than AAR Corp. However, Rocket Lab is 5.98 times more volatile than AAR Corp. It trades about 0.04 of its potential returns per unit of risk. AAR Corp is currently generating about 0.06 per unit of risk. If you would invest 2,736 in Rocket Lab USA on November 9, 2024 and sell it today you would earn a total of 32.00 from holding Rocket Lab USA or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Lab USA vs. AAR Corp
Performance |
| Timeline |
| Rocket Lab USA |
| AAR Corp |
Rocket Lab and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and AAR Corp
The main advantage of trading using opposite Rocket Lab and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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