Correlation Between Spirit Aerosystems and Rocket Lab

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

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

Diversification Opportunities for Spirit Aerosystems and Rocket Lab

-0.51

Correlation Coefficient

Spirit Aerosystems  Rocket Lab

Excellent diversification

The 3 months correlation between Spirit and Rocket is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Aerosystems Holdings 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 Spirit Aerosystems 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 Spirit Aerosystems Holdings 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 Spirit Aerosystems i.e., Spirit Aerosystems and Rocket Lab go up and down completely randomly.

Pair Corralation between Spirit Aerosystems and Rocket Lab

Considering the 90-day investment horizon Spirit Aerosystems Holdings is expected to under-perform the Rocket Lab. But the stock apears to be less risky and, when comparing its historical volatility, Spirit Aerosystems Holdings is 3.52 times less risky than Rocket Lab. The stock trades about -0.02 of its potential returns per unit of risk. The Rocket Lab USA is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  606.00  in Rocket Lab USA on September 2, 2024 and sell it today you would earn a total of  2,122  from holding Rocket Lab USA or generate 350.17% return on investment over 90 days.

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

Spirit Aerosystems Holdings  vs.  Rocket Lab USA

Spirit Aerosystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Aerosystems Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Spirit Aerosystems is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Rocket Lab USA

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 34 (%) 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 Spirit Aerosystems and Rocket Lab

The main advantage of trading using opposite Spirit Aerosystems and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Aerosystems 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 Spirit Aerosystems Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.