Correlation Between Vertical Aerospace and Archer Aviation

Can any of the company-specific risk be diversified away by investing in both Vertical Aerospace and Archer Aviation 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 Vertical Aerospace and Archer Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vertical Aerospace and Archer Aviation, you can compare the effects of market volatilities on Vertical Aerospace and Archer Aviation 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 Vertical Aerospace with a short position of Archer Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertical Aerospace and Archer Aviation.

Diversification Opportunities for Vertical Aerospace and Archer Aviation

0.58

Correlation Coefficient

Vertical Aerospace  Archer Aviation

Very weak diversification

The 3 months correlation between Vertical and Archer is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vertical Aerospace and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation and Vertical Aerospace 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 Vertical Aerospace are associated (or correlated) with Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Vertical Aerospace i.e., Vertical Aerospace and Archer Aviation go up and down completely randomly.

Pair Corralation between Vertical Aerospace and Archer Aviation

Given the investment horizon of 90 days Vertical Aerospace is expected to generate 1.31 times more return on investment than Archer Aviation. However, Vertical Aerospace is 1.31 times more volatile than Archer Aviation. It trades about 0.1 of its potential returns per unit of risk. Archer Aviation is currently generating about 0.06 per unit of risk. If you would invest  430.00  in Vertical Aerospace on May 4, 2025 and sell it today you would earn a total of  152.00  from holding Vertical Aerospace or generate 35.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Vertical Aerospace  vs.  Archer Aviation

Vertical Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vertical Aerospace are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Vertical Aerospace disclosed solid returns over the last few months and may actually be approaching a breakup point.

Archer Aviation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical indicators, Archer Aviation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vertical Aerospace and Archer Aviation

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

The idea behind Vertical Aerospace and Archer Aviation 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.