Correlation Between AstroNova and Red Cat
Can any of the company-specific risk be diversified away by investing in both AstroNova and Red Cat 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 AstroNova and Red Cat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstroNova and Red Cat Holdings, you can compare the effects of market volatilities on AstroNova and Red Cat 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 AstroNova with a short position of Red Cat. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstroNova and Red Cat.
Diversification Opportunities for AstroNova and Red Cat
Modest diversification
The 3 months correlation between AstroNova and Red is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding AstroNova and Red Cat Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Cat Holdings and AstroNova 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 AstroNova are associated (or correlated) with Red Cat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Cat Holdings has no effect on the direction of AstroNova i.e., AstroNova and Red Cat go up and down completely randomly.
Pair Corralation between AstroNova and Red Cat
Given the investment horizon of 90 days AstroNova is expected to generate 8.78 times less return on investment than Red Cat. But when comparing it to its historical volatility, AstroNova is 2.91 times less risky than Red Cat. It trades about 0.03 of its potential returns per unit of risk. Red Cat Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 114.00 in Red Cat Holdings on August 27, 2024 and sell it today you would earn a total of 783.00 from holding Red Cat Holdings or generate 686.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstroNova vs. Red Cat Holdings
Performance |
| Timeline |
| AstroNova |
| Red Cat Holdings |
AstroNova and Red Cat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstroNova and Red Cat
The main advantage of trading using opposite AstroNova and Red Cat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstroNova position performs unexpectedly, Red Cat 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 Red Cat will offset losses from the drop in Red Cat's long position.| AstroNova vs. Key Tronic | AstroNova vs. Identiv | AstroNova vs. Red Cat Holdings | AstroNova vs. TransAct Technologies Incorporated |
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.
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