Correlation Between Vertical Aerospace and Momentus

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

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

Diversification Opportunities for Vertical Aerospace and Momentus

0.88

Correlation Coefficient

Vertical Aerospace  Momentus

Very poor diversification

The 3 months correlation between Vertical and Momentus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Momentus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentus and Vertical Aerospace 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 Vertical Aerospace 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 Vertical Aerospace i.e., Vertical Aerospace and Momentus go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Momentus

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 1.07 times more return on investment than Momentus. However, Vertical Aerospace is 1.07 times more volatile than Momentus. It trades about -0.2 of its potential returns per unit of risk. Momentus is currently generating about -0.26 per unit of risk. If you would invest  1,252  in Vertical Aerospace on December 30, 2024 and sell it today you would lose (911.00) from holding Vertical Aerospace or give up 72.76% of portfolio value over 90 days.

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

Vertical Aerospace  vs.  Momentus

Vertical Aerospace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vertical Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Momentus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Momentus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Vertical Aerospace and Momentus

The main advantage of trading using opposite Vertical Aerospace and Momentus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertical Aerospace 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 Vertical Aerospace 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.