Correlation Between Rocket Lab and Thermal Energy
Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Thermal Energy 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 Thermal Energy 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 Thermal Energy International, you can compare the effects of market volatilities on Rocket Lab and Thermal Energy 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 Thermal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Thermal Energy.
Diversification Opportunities for Rocket Lab and Thermal Energy
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rocket and Thermal is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Thermal Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermal Energy Inter 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 Thermal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermal Energy Inter has no effect on the direction of Rocket Lab i.e., Rocket Lab and Thermal Energy go up and down completely randomly.
Pair Corralation between Rocket Lab and Thermal Energy
Given the investment horizon of 90 days Rocket Lab USA is expected to generate 1.64 times more return on investment than Thermal Energy. However, Rocket Lab is 1.64 times more volatile than Thermal Energy International. It trades about 0.3 of its potential returns per unit of risk. Thermal Energy International is currently generating about -0.08 per unit of risk. If you would invest 1,351 in Rocket Lab USA on October 9, 2024 and sell it today you would earn a total of 1,529 from holding Rocket Lab USA or generate 113.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Rocket Lab USA vs. Thermal Energy International
Performance |
| Timeline |
| Rocket Lab USA |
| Thermal Energy Inter |
Rocket Lab and Thermal Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Lab and Thermal Energy
The main advantage of trading using opposite Rocket Lab and Thermal Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Lab position performs unexpectedly, Thermal Energy 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 Thermal Energy will offset losses from the drop in Thermal Energy's long position.| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
| Thermal Energy vs. QYOU Media | Thermal Energy vs. LeanLife Health | Thermal Energy vs. Prime Meridian Holding | Thermal Energy vs. TrackX Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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