Correlation Between Momentus and Vertical Aerospace

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

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

Diversification Opportunities for Momentus and Vertical Aerospace

0.88

Correlation Coefficient

Momentus  Vertical Aerospace

Very poor diversification

The 3 months correlation between Momentus and Vertical is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Momentus and Vertical Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertical Aerospace and Momentus 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 Momentus are associated (or correlated) with Vertical Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertical Aerospace has no effect on the direction of Momentus i.e., Momentus and Vertical Aerospace go up and down completely randomly.

Pair Corralation between Momentus and Vertical Aerospace

Given the investment horizon of 90 days Momentus is expected to under-perform the Vertical Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, Momentus is 1.07 times less risky than Vertical Aerospace. The stock trades about -0.26 of its potential returns per unit of risk. The Vertical Aerospace is currently generating about -0.2 of returns per unit of risk over similar time horizon. 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

Momentus  vs.  Vertical Aerospace

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.

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.

Pair Trading with Momentus and Vertical Aerospace

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

The idea behind Momentus and Vertical Aerospace 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.