Correlation Between Rocket Lab and Micro Imaging

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

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

Diversification Opportunities for Rocket Lab and Micro Imaging

0.0

Correlation Coefficient

Rocket Lab  Micro Imaging

Pay attention - limited upside

The 3 months correlation between Rocket and Micro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Micro Imaging Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Imaging Technology and Rocket Lab 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 Rocket Lab USA are associated (or correlated) with Micro Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Imaging Technology has no effect on the direction of Rocket Lab i.e., Rocket Lab and Micro Imaging go up and down completely randomly.

Pair Corralation between Rocket Lab and Micro Imaging

If you would invest  2,660  in Rocket Lab USA on October 25, 2024 and sell it today you would earn a total of  497.00  from holding Rocket Lab USA or generate 18.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Rocket Lab USA  vs.  Micro Imaging Technology

Rocket Lab USA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 19 (%) 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.

Micro Imaging Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micro Imaging Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Micro Imaging is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rocket Lab and Micro Imaging

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

The idea behind Rocket Lab USA and Micro Imaging Technology 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.