Correlation Between Rocket Lab and Sturm Ruger

Can any of the company-specific risk be diversified away by investing in both Rocket Lab and Sturm Ruger 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 Sturm Ruger 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 Sturm Ruger, you can compare the effects of market volatilities on Rocket Lab and Sturm Ruger 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 Sturm Ruger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Lab and Sturm Ruger.

Diversification Opportunities for Rocket Lab and Sturm Ruger

-0.63

Correlation Coefficient

Rocket Lab  Sturm Ruger

Excellent diversification

The 3 months correlation between Rocket and Sturm is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and Sturm Ruger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturm Ruger 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 Sturm Ruger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturm Ruger has no effect on the direction of Rocket Lab i.e., Rocket Lab and Sturm Ruger go up and down completely randomly.

Pair Corralation between Rocket Lab and Sturm Ruger

Given the investment horizon of 90 days Rocket Lab USA is expected to generate 5.5 times more return on investment than Sturm Ruger. However, Rocket Lab is 5.5 times more volatile than Sturm Ruger. It trades about 0.18 of its potential returns per unit of risk. Sturm Ruger is currently generating about -0.27 per unit of risk. 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

Rocket Lab USA  vs.  Sturm Ruger

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.

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.

Pair Trading with Rocket Lab and Sturm Ruger

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

The idea behind Rocket Lab USA and Sturm Ruger 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.