Correlation Between Rocket Lab and Momentus
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Momentus 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 Momentus 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 Momentus, you can compare the effects of market volatilities on Rocket Lab and Momentus 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 Momentus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Momentus.
Diversification Opportunities for Rocket Lab and Momentus
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rocket and Momentus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Momentus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentus 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 Momentus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentus has no effect on the direction of Rocket Lab i.e., Rocket Lab and Momentus go up and down completely randomly.
Pair Corralation between Rocket Lab and Momentus
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 0.3 times more return on investment than Momentus. However, Rocket Lab USA is 3.36 times less risky than Momentus. It trades about 0.21 of its potential returns per unit of risk. Momentus is currently generating about 0.04 per unit of risk. If you would invest 459.00 in Rocket Lab USA on August 27, 2024 and sell it today you would earn a total of 1,867 from holding Rocket Lab USA or generate 406.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Rocket Lab USA vs. Momentus
Performance |
Timeline |
Rocket Lab USA |
Momentus |
Rocket Lab and Momentus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rocket Lab and Momentus
The main advantage of trading using opposite Rocket Lab and Momentus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Momentus 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 Momentus will offset losses from the drop in Momentus' long position.Rocket Lab vs. The Boeing | Rocket Lab vs. Curtiss Wright | Rocket Lab vs. Ehang Holdings | Rocket Lab vs. General Dynamics |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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