Correlation Between Virgin Galactic and Momentus

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

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

Diversification Opportunities for Virgin Galactic and Momentus

0.06

Correlation Coefficient

Virgin Galactic  Momentus

Significant diversification

The 3 months correlation between Virgin and Momentus is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Galactic Holdings and Momentus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentus and Virgin Galactic 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 Virgin Galactic Holdings are associated (or correlated) with Momentus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentus has no effect on the direction of Virgin Galactic i.e., Virgin Galactic and Momentus go up and down completely randomly.

Pair Corralation between Virgin Galactic and Momentus

Given the investment horizon of 90 days Virgin Galactic is expected to generate 2.72 times less return on investment than Momentus. But when comparing it to its historical volatility, Virgin Galactic Holdings is 4.08 times less risky than Momentus. It trades about 0.08 of its potential returns per unit of risk. Momentus is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Momentus on September 2, 2024 and sell it today you would lose (12.00) from holding Momentus or give up 16.44% of portfolio value over 90 days.

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

Virgin Galactic Holdings  vs.  Momentus

Virgin Galactic Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Galactic Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Virgin Galactic exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Virgin Galactic and Momentus

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

The idea behind Virgin Galactic Holdings and Momentus 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.