Correlation Between Momentus and Terran Orbital

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

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

Diversification Opportunities for Momentus and Terran Orbital

-0.18

Correlation Coefficient

Momentus  Terran Orbital

Good diversification

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

Pair Corralation between Momentus and Terran Orbital

Given the investment horizon of 90 days Momentus is expected to generate 2.92 times more return on investment than Terran Orbital. However, Momentus is 2.92 times more volatile than Terran Orbital Corp. It trades about 0.11 of its potential returns per unit of risk. Terran Orbital Corp is currently generating about -0.2 per unit of risk. If you would invest  59.00  in Momentus on July 12, 2024 and sell it today you would earn a total of  47.00  from holding Momentus or generate 79.66% return on investment over 90 days.

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

Momentus  vs.  Terran Orbital Corp

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.

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.

Pair Trading with Momentus and Terran Orbital

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

The idea behind Momentus and Terran Orbital Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.