Correlation Between Transdigm Group and Rocket Lab
Can any of the company-specific risk be diversified away by investing in both Transdigm Group 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 Transdigm Group and Rocket Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and Rocket Lab USA, you can compare the effects of market volatilities on Transdigm Group 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 Transdigm Group with a short position of Rocket Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and Rocket Lab.
Diversification Opportunities for Transdigm Group and Rocket Lab
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Transdigm and Rocket is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated 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 Transdigm Group 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 Transdigm Group Incorporated 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 Transdigm Group i.e., Transdigm Group and Rocket Lab go up and down completely randomly.
Pair Corralation between Transdigm Group and Rocket Lab
Considering the 90-day investment horizon Transdigm Group is expected to generate 57.07 times less return on investment than Rocket Lab. But when comparing it to its historical volatility, Transdigm Group Incorporated is 4.14 times less risky than Rocket Lab. It trades about 0.02 of its potential returns per unit of risk. Rocket Lab USA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,126 in Rocket Lab USA on October 26, 2024 and sell it today you would earn a total of 2,031 from holding Rocket Lab USA or generate 180.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Transdigm Group Incorporated vs. Rocket Lab USA
Performance |
Timeline |
Transdigm Group |
Rocket Lab USA |
Transdigm Group and Rocket Lab Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Transdigm Group and Rocket Lab
The main advantage of trading using opposite Transdigm Group and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group 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.Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
Rocket Lab vs. Redwire Corp | Rocket Lab vs. Momentus | Rocket Lab vs. Planet Labs PBC | Rocket Lab vs. Virgin Galactic Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume |