Correlation Between Spirit Aerosystems and Rocket Lab
Can any of the company-specific risk be diversified away by investing in both Spirit Aerosystems and Rocket Lab 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 Spirit Aerosystems and Rocket Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirit Aerosystems Holdings and Rocket Lab USA, you can compare the effects of market volatilities on Spirit Aerosystems and Rocket Lab 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 Spirit Aerosystems with a short position of Rocket Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Aerosystems and Rocket Lab.
Diversification Opportunities for Spirit Aerosystems and Rocket Lab
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Spirit and Rocket is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Aerosystems Holdings and Rocket Lab USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Lab USA and Spirit Aerosystems 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 Spirit Aerosystems Holdings are associated (or correlated) with Rocket Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Lab USA has no effect on the direction of Spirit Aerosystems i.e., Spirit Aerosystems and Rocket Lab go up and down completely randomly.
Pair Corralation between Spirit Aerosystems and Rocket Lab
Considering the 90-day investment horizon Spirit Aerosystems Holdings is expected to under-perform the Rocket Lab. But the stock apears to be less risky and, when comparing its historical volatility, Spirit Aerosystems Holdings is 4.17 times less risky than Rocket Lab. The stock trades about -0.02 of its potential returns per unit of risk. The Rocket Lab USA is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest 1,096 in Rocket Lab USA on August 31, 2024 and sell it today you would earn a total of 1,471 from holding Rocket Lab USA or generate 134.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirit Aerosystems Holdings vs. Rocket Lab USA
Performance |
| Timeline |
| Spirit Aerosystems |
| Rocket Lab USA |
Spirit Aerosystems and Rocket Lab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirit Aerosystems and Rocket Lab
The main advantage of trading using opposite Spirit Aerosystems and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Aerosystems position performs unexpectedly, Rocket Lab 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 Rocket Lab will offset losses from the drop in Rocket Lab's long position.| Spirit Aerosystems vs. Howmet Aerospace | Spirit Aerosystems vs. Huntington Ingalls Industries | Spirit Aerosystems vs. L3Harris Technologies | Spirit Aerosystems vs. Embraer SA ADR |
| Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic 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 Stocks Directory module to find actively traded stocks across global markets.
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