Correlation Between Rocket Lab and VirTra

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

Diversification Opportunities for Rocket Lab and VirTra

0.91

Correlation Coefficient

Rocket Lab  VirTra

Almost no diversification

The 3 months correlation between Rocket and VirTra is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc 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 VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of Rocket Lab i.e., Rocket Lab and VirTra go up and down completely randomly.

Pair Corralation between Rocket Lab and VirTra

Given the investment horizon of 90 days Rocket Lab USA is expected to generate 1.41 times more return on investment than VirTra. However, Rocket Lab is 1.41 times more volatile than VirTra Inc. It trades about 0.27 of its potential returns per unit of risk. VirTra Inc is currently generating about 0.0 per unit of risk. If you would invest  444.00  in Rocket Lab USA on September 5, 2024 and sell it today you would earn a total of  1,857  from holding Rocket Lab USA or generate 418.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Rocket Lab USA  vs.  VirTra Inc

Rocket Lab USA

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Rocket Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

VirTra Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VirTra Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, VirTra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocket Lab and VirTra

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

The idea behind Rocket Lab USA and VirTra Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.