Correlation Between Eve Holding and Rocket Lab

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

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

Diversification Opportunities for Eve Holding and Rocket Lab

0.83

Correlation Coefficient

Eve Holding  Rocket Lab

Very poor diversification

The 3 months correlation between Eve and Rocket is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding 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 Eve Holding 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 Eve Holding 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 Eve Holding i.e., Eve Holding and Rocket Lab go up and down completely randomly.

Pair Corralation between Eve Holding and Rocket Lab

Given the investment horizon of 90 days Eve Holding is expected to under-perform the Rocket Lab. But the stock apears to be less risky and, when comparing its historical volatility, Eve Holding is 1.37 times less risky than Rocket Lab. The stock trades about -0.13 of its potential returns per unit of risk. The Rocket Lab USA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,632  in Rocket Lab USA on December 28, 2024 and sell it today you would lose (790.00) from holding Rocket Lab USA or give up 30.02% of portfolio value over 90 days.

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

Eve Holding  vs.  Rocket Lab USA

Eve Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rocket Lab USA

Risk-Adjusted Performance

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 abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eve Holding and Rocket Lab

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

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.