Correlation Between Rocket Lab and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies Corp, you can compare the effects of market volatilities on Rocket Lab and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Raytheon Technologies.
Diversification Opportunities for Rocket Lab and Raytheon Technologies
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rocket and Raytheon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Rocket Lab i.e., Rocket Lab and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Rocket Lab and Raytheon Technologies
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 5.05 times more return on investment than Raytheon Technologies. However, Rocket Lab is 5.05 times more volatile than Raytheon Technologies Corp. It trades about 0.58 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.0 per unit of risk. If you would invest 1,096 in Rocket Lab USA on August 31, 2024 and sell it today you would earn a total of 1,471 from holding Rocket Lab USA or generate 134.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rocket Lab USA vs. Raytheon Technologies Corp
Performance |
| Timeline |
| Rocket Lab USA |
| Raytheon Technologies |
Rocket Lab and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Raytheon Technologies
The main advantage of trading using opposite Rocket Lab and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics | Raytheon Technologies vs. The Boeing | Raytheon Technologies vs. L3Harris Technologies |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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