Correlation Between Rocket Lab and VirTra

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

Diversification Opportunities for Rocket Lab and VirTra

0.79

Correlation Coefficient

Rocket Lab  VirTra

Poor diversification

The 3 months correlation between Rocket and VirTra is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Lab USA and VirTra Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirTra Inc 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 VirTra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirTra Inc has no effect on the direction of Rocket Lab i.e., Rocket Lab and VirTra go up and down completely randomly.

Pair Corralation between Rocket Lab and VirTra

Given the investment horizon of 90 days Rocket Lab USA is expected to under-perform the VirTra. In addition to that, Rocket Lab is 2.64 times more volatile than VirTra Inc. It trades about -0.06 of its total potential returns per unit of risk. VirTra Inc is currently generating about -0.16 per unit of volatility. If you would invest  662.00  in VirTra Inc on December 28, 2024 and sell it today you would lose (145.00) from holding VirTra Inc or give up 21.9% of portfolio value over 90 days.

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

Rocket Lab USA  vs.  VirTra Inc

Rocket Lab USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rocket Lab USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

VirTra Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days VirTra Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Rocket Lab and VirTra

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

The idea behind Rocket Lab USA and VirTra Inc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.