Correlation Between Momentus and Rocket Lab

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

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

Diversification Opportunities for Momentus and Rocket Lab

-0.09

Correlation Coefficient

Momentus  Rocket Lab

Good diversification

The 3 months correlation between Momentus and Rocket is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Momentus 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 Momentus 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 Momentus 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 Momentus i.e., Momentus and Rocket Lab go up and down completely randomly.

Pair Corralation between Momentus and Rocket Lab

Given the investment horizon of 90 days Momentus is expected to generate 2.37 times less return on investment than Rocket Lab. In addition to that, Momentus is 3.64 times more volatile than Rocket Lab USA. It trades about 0.05 of its total potential returns per unit of risk. Rocket Lab USA is currently generating about 0.44 per unit of volatility. If you would invest  606.00  in Rocket Lab USA on September 2, 2024 and sell it today you would earn a total of  2,122  from holding Rocket Lab USA or generate 350.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Momentus  vs.  Rocket Lab USA

Momentus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Momentus are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Momentus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rocket Lab USA

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Rocket Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Momentus and Rocket Lab

The main advantage of trading using opposite Momentus and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Momentus 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.

The idea behind Momentus and Rocket Lab USA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.