Correlation Between Vertical Aerospace and Astra Space

Can any of the company-specific risk be diversified away by investing in both Vertical Aerospace and Astra Space 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 Vertical Aerospace and Astra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vertical Aerospace and Astra Space, you can compare the effects of market volatilities on Vertical Aerospace and Astra Space 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 Vertical Aerospace with a short position of Astra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertical Aerospace and Astra Space.

Diversification Opportunities for Vertical Aerospace and Astra Space

0.56

Correlation Coefficient

Vertical Aerospace  Astra Space

Very weak diversification

The 3 months correlation between Vertical and Astra is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Astra Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Space and Vertical Aerospace 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 Vertical Aerospace are associated (or correlated) with Astra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Space has no effect on the direction of Vertical Aerospace i.e., Vertical Aerospace and Astra Space go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Astra Space

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 0.79 times more return on investment than Astra Space. However, Vertical Aerospace is 1.26 times less risky than Astra Space. It trades about -0.01 of its potential returns per unit of risk. Astra Space is currently generating about -0.04 per unit of risk. If you would invest  3,390  in Vertical Aerospace on September 2, 2024 and sell it today you would lose (2,380) from holding Vertical Aerospace or give up 70.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.25%
Values	Daily Returns

Vertical Aerospace  vs.  Astra Space

Vertical Aerospace

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Aerospace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Vertical Aerospace disclosed solid returns over the last few months and may actually be approaching a breakup point.

Astra Space

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra Space has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Astra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vertical Aerospace and Astra Space

The main advantage of trading using opposite Vertical Aerospace and Astra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertical Aerospace position performs unexpectedly, Astra Space 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 Astra Space will offset losses from the drop in Astra Space's long position.

The idea behind Vertical Aerospace and Astra Space pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.