Correlation Between Rocket Lab and Solution Financial
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on Rocket Lab and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Solution Financial.
Diversification Opportunities for Rocket Lab and Solution Financial
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rocket and Solution is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Rocket Lab i.e., Rocket Lab and Solution Financial go up and down completely randomly.
Pair Corralation between Rocket Lab and Solution Financial
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 2.66 times more return on investment than Solution Financial. However, Rocket Lab is 2.66 times more volatile than Solution Financial. It trades about 0.48 of its potential returns per unit of risk. Solution Financial is currently generating about -0.07 per unit of risk. If you would invest 1,091 in Rocket Lab USA on August 24, 2024 and sell it today you would earn a total of 1,150 from holding Rocket Lab USA or generate 105.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Lab USA vs. Solution Financial
Performance |
| Timeline |
| Rocket Lab USA |
| Solution Financial |
Rocket Lab and Solution Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Solution Financial
The main advantage of trading using opposite Rocket Lab and Solution Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Solution Financial 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 Solution Financial will offset losses from the drop in Solution Financial's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Solution Financial vs. United Rentals | Solution Financial vs. AerCap Holdings NV | Solution Financial vs. Fortress Transp Infra | Solution Financial vs. U Haul Holding |
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 Stocks Directory module to find actively traded stocks across global markets.
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