Correlation Between Sturm Ruger and Rocket Lab

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

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

Diversification Opportunities for Sturm Ruger and Rocket Lab

-0.63

Correlation Coefficient

Sturm Ruger  Rocket Lab

Excellent diversification

The 3 months correlation between Sturm and Rocket is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sturm Ruger 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 Sturm Ruger 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 Sturm Ruger 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 Sturm Ruger i.e., Sturm Ruger and Rocket Lab go up and down completely randomly.

Pair Corralation between Sturm Ruger and Rocket Lab

Considering the 90-day investment horizon Sturm Ruger is expected to under-perform the Rocket Lab. But the stock apears to be less risky and, when comparing its historical volatility, Sturm Ruger is 5.5 times less risky than Rocket Lab. The stock trades about -0.27 of its potential returns per unit of risk. The Rocket Lab USA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,324  in Rocket Lab USA on October 10, 2024 and sell it today you would earn a total of  471.00  from holding Rocket Lab USA or generate 20.27% return on investment over 90 days.

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

Sturm Ruger  vs.  Rocket Lab USA

Sturm Ruger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sturm Ruger has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Rocket Lab USA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Rocket Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sturm Ruger and Rocket Lab

The main advantage of trading using opposite Sturm Ruger and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sturm Ruger 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 Sturm Ruger 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.