Correlation Between Vertical Aerospace and Nauticus Robotics

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

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

Diversification Opportunities for Vertical Aerospace and Nauticus Robotics

0.56

Correlation Coefficient

Vertical Aerospace  Nauticus Robotics

Very weak diversification

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

Pair Corralation between Vertical Aerospace and Nauticus Robotics

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 1.43 times more return on investment than Nauticus Robotics. However, Vertical Aerospace is 1.43 times more volatile than Nauticus Robotics. It trades about 0.08 of its potential returns per unit of risk. Nauticus Robotics is currently generating about -0.04 per unit of risk. If you would invest  819.00  in Vertical Aerospace on September 2, 2024 and sell it today you would earn a total of  191.00  from holding Vertical Aerospace or generate 23.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vertical Aerospace  vs.  Nauticus Robotics

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.

Nauticus Robotics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nauticus Robotics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Vertical Aerospace and Nauticus Robotics

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

The idea behind Vertical Aerospace and Nauticus Robotics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.