Correlation Between Rocket Lab and Virgin Galactic
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Virgin Galactic 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 Virgin Galactic 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 Virgin Galactic Holdings, you can compare the effects of market volatilities on Rocket Lab and Virgin Galactic 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 Virgin Galactic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Virgin Galactic.
Diversification Opportunities for Rocket Lab and Virgin Galactic
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rocket and Virgin is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Virgin Galactic Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Galactic 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 Virgin Galactic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Galactic Holdings has no effect on the direction of Rocket Lab i.e., Rocket Lab and Virgin Galactic go up and down completely randomly.
Pair Corralation between Rocket Lab and Virgin Galactic
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 2.08 times more return on investment than Virgin Galactic. However, Rocket Lab is 2.08 times more volatile than Virgin Galactic Holdings. It trades about 0.12 of its potential returns per unit of risk. Virgin Galactic Holdings is currently generating about -0.29 per unit of risk. If you would invest 2,496 in Rocket Lab USA on November 2, 2024 and sell it today you would earn a total of 357.00 from holding Rocket Lab USA or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Lab USA vs. Virgin Galactic Holdings
Performance |
| Timeline |
| Rocket Lab USA |
| Virgin Galactic Holdings |
Rocket Lab and Virgin Galactic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Virgin Galactic
The main advantage of trading using opposite Rocket Lab and Virgin Galactic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Virgin Galactic 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 Virgin Galactic will offset losses from the drop in Virgin Galactic's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Virgin Galactic vs. Planet Labs PBC | Virgin Galactic vs. Eve Holding | Virgin Galactic vs. Redwire Corp | Virgin Galactic vs. Lockheed Martin |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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