Correlation Between Rocket Lab and Huntington Ingalls

Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Huntington Ingalls 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 Huntington Ingalls 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 Huntington Ingalls Industries, you can compare the effects of market volatilities on Rocket Lab and Huntington Ingalls 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 Huntington Ingalls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Huntington Ingalls.

Diversification Opportunities for Rocket Lab and Huntington Ingalls

-0.81

Correlation Coefficient

Rocket Lab  Huntington Ingalls

Pay attention - limited upside

The 3 months correlation between Rocket and Huntington is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Rocket Lab i.e., Rocket Lab and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Rocket Lab and Huntington Ingalls

Given the investment horizon of 90 days Rocket Lab USA is expected to generate 1.6 times more return on investment than Huntington Ingalls. However, Rocket Lab is 1.6 times more volatile than Huntington Ingalls Industries. It trades about 0.44 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  606.00  in Rocket Lab USA on August 31, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Rocket Lab USA  vs.  Huntington Ingalls Industries

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.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Rocket Lab and Huntington Ingalls

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

The idea behind Rocket Lab USA and Huntington Ingalls Industries 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.