Correlation Between Rocket Lab and Transdigm Group
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Transdigm Group 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 Transdigm Group 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 Transdigm Group Incorporated, you can compare the effects of market volatilities on Rocket Lab and Transdigm Group 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 Transdigm Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Transdigm Group.
Diversification Opportunities for Rocket Lab and Transdigm Group
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rocket and Transdigm is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Transdigm Group Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transdigm Group 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 Transdigm Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transdigm Group has no effect on the direction of Rocket Lab i.e., Rocket Lab and Transdigm Group go up and down completely randomly.
Pair Corralation between Rocket Lab and Transdigm Group
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 2.93 times more return on investment than Transdigm Group. However, Rocket Lab is 2.93 times more volatile than Transdigm Group Incorporated. It trades about 0.11 of its potential returns per unit of risk. Transdigm Group Incorporated is currently generating about 0.12 per unit of risk. If you would invest 394.00 in Rocket Lab USA on August 28, 2024 and sell it today you would earn a total of 2,150 from holding Rocket Lab USA or generate 545.69% 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. Transdigm Group Incorporated
Performance |
| Timeline |
| Rocket Lab USA |
| Transdigm Group |
Rocket Lab and Transdigm Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Transdigm Group
The main advantage of trading using opposite Rocket Lab and Transdigm Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Transdigm Group 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 Transdigm Group will offset losses from the drop in Transdigm Group's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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