Correlation Between VirTra and Rocket Lab

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

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

Diversification Opportunities for VirTra and Rocket Lab

-0.38

Correlation Coefficient

VirTra  Rocket Lab

Very good diversification

The 3 months correlation between VirTra and Rocket is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc 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 VirTra 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 VirTra Inc 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 VirTra i.e., VirTra and Rocket Lab go up and down completely randomly.

Pair Corralation between VirTra and Rocket Lab

Given the investment horizon of 90 days VirTra Inc is expected to generate 2.67 times more return on investment than Rocket Lab. However, VirTra is 2.67 times more volatile than Rocket Lab USA. It trades about 0.11 of its potential returns per unit of risk. Rocket Lab USA is currently generating about -0.03 per unit of risk. If you would invest  1,170  in VirTra Inc on February 13, 2024 and sell it today you would earn a total of  508.00  from holding VirTra Inc or generate 43.42% return on investment over 90 days.

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

VirTra Inc  vs.  Rocket Lab USA

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.

Rocket Lab USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Lab USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Rocket Lab is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VirTra and Rocket Lab

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

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.