Correlation Between Terran Orbital and Momentus

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

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

Diversification Opportunities for Terran Orbital and Momentus

-0.18

Correlation Coefficient

Terran Orbital  Momentus

Good diversification

The 3 months correlation between Terran and Momentus is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Terran Orbital Corp and Momentus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Momentus and Terran Orbital 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 Terran Orbital Corp are associated (or correlated) with Momentus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Momentus has no effect on the direction of Terran Orbital i.e., Terran Orbital and Momentus go up and down completely randomly.

Pair Corralation between Terran Orbital and Momentus

Given the investment horizon of 90 days Terran Orbital is expected to generate 107.59 times less return on investment than Momentus. But when comparing it to its historical volatility, Terran Orbital Corp is 10.53 times less risky than Momentus. It trades about 0.02 of its potential returns per unit of risk. Momentus is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Momentus on July 12, 2024 and sell it today you would earn a total of  42.00  from holding Momentus or generate 65.63% return on investment over 90 days.

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

Terran Orbital Corp  vs.  Momentus

Terran Orbital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terran Orbital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Momentus

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Terran Orbital and Momentus

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

The idea behind Terran Orbital Corp and Momentus 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.