Correlation Between Avnet and Rocket Lab

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Can any of the company-specific risk be diversified away by investing in both Avnet 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 Avnet and Rocket Lab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avnet Inc and Rocket Lab USA, you can compare the effects of market volatilities on Avnet 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 Avnet with a short position of Rocket Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avnet and Rocket Lab.

Diversification Opportunities for Avnet and Rocket Lab

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Avnet and Rocket is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Avnet Inc 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 Avnet 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 Avnet Inc 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 Avnet i.e., Avnet and Rocket Lab go up and down completely randomly.

Pair Corralation between Avnet and Rocket Lab

Considering the 90-day investment horizon Avnet Inc is expected to generate 0.49 times more return on investment than Rocket Lab. However, Avnet Inc is 2.05 times less risky than Rocket Lab. It trades about -0.1 of its potential returns per unit of risk. Rocket Lab USA is currently generating about -0.1 per unit of risk. If you would invest  4,125  in Avnet Inc on July 6, 2022 and sell it today you would lose (228.00)  from holding Avnet Inc or give up 5.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Avnet Inc  vs.  Rocket Lab USA

 Performance (%) 
       Timeline  
Avnet Inc 
Avnet Performance
0 of 100
Over the last 90 days Avnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Avnet Price Channel

Rocket Lab USA 
Rocket Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Lab USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Rocket Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Rocket Price Channel

Avnet and Rocket Lab Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avnet and Rocket Lab

The main advantage of trading using opposite Avnet and Rocket Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avnet 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.
Avnet vs. Amazon Inc
The idea behind Avnet Inc 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.
Rocket Lab vs. Amazon Inc
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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