Correlation Between Northrop Grumman and Rocket Lab
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and Rocket Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Rocket Lab USA, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of Rocket Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Rocket Lab.
Diversification Opportunities for Northrop Grumman and Rocket Lab
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Northrop and Rocket is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman i.e., Northrop Grumman and Rocket Lab go up and down completely randomly.
Pair Corralation between Northrop Grumman and Rocket Lab
Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.37 times more return on investment than Rocket Lab. However, Northrop Grumman is 2.7 times less risky than Rocket Lab. It trades about 0.04 of its potential returns per unit of risk. Rocket Lab USA is currently generating about -0.04 per unit of risk. If you would invest 45,693 in Northrop Grumman on February 28, 2024 and sell it today you would earn a total of 950.00 from holding Northrop Grumman or generate 2.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Northrop Grumman vs. Rocket Lab USA
Performance |
Timeline |
Northrop Grumman |
Rocket Lab USA |
Northrop Grumman and Rocket Lab Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northrop Grumman and Rocket Lab
The main advantage of trading using opposite Northrop Grumman and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. The Boeing | Northrop Grumman vs. Lockheed Martin |
Rocket Lab vs. Northrop Grumman | Rocket Lab vs. General Dynamics | Rocket Lab vs. L3Harris Technologies | Rocket Lab vs. The Boeing |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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