Correlation Between Rocket Lab and Rolls Royce
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Rolls Royce 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 Rolls Royce 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 Rolls Royce Holdings PLC, you can compare the effects of market volatilities on Rocket Lab and Rolls Royce 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 Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Rolls Royce.
Diversification Opportunities for Rocket Lab and Rolls Royce
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rocket and Rolls is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Rolls Royce Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of Rocket Lab i.e., Rocket Lab and Rolls Royce go up and down completely randomly.
Pair Corralation between Rocket Lab and Rolls Royce
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 2.11 times more return on investment than Rolls Royce. However, Rocket Lab is 2.11 times more volatile than Rolls Royce Holdings PLC. It trades about 0.1 of its potential returns per unit of risk. Rolls Royce Holdings PLC is currently generating about 0.15 per unit of risk. If you would invest 400.00 in Rocket Lab USA on November 27, 2024 and sell it today you would earn a total of 1,849 from holding Rocket Lab USA or generate 462.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Lab USA vs. Rolls Royce Holdings PLC
Performance |
| Timeline |
| Rocket Lab USA |
| Rolls Royce Holdings |
Rocket Lab and Rolls Royce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Rolls Royce
The main advantage of trading using opposite Rocket Lab and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Rolls Royce 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 Rolls Royce will offset losses from the drop in Rolls Royce's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Rolls Royce vs. Rolls Royce Holdings plc | Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce vs. Embraer SA ADR |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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