Correlation Between Nasdaq and REDFLEX HOLDINGS
Can any of the company-specific risk be diversified away by investing in both Nasdaq and REDFLEX HOLDINGS 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 Nasdaq and REDFLEX HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and REDFLEX HOLDINGS LTD, you can compare the effects of market volatilities on Nasdaq and REDFLEX HOLDINGS 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 Nasdaq with a short position of REDFLEX HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and REDFLEX HOLDINGS.
Diversification Opportunities for Nasdaq and REDFLEX HOLDINGS
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq and REDFLEX is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and REDFLEX HOLDINGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDFLEX HOLDINGS LTD and Nasdaq 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 Nasdaq Inc are associated (or correlated) with REDFLEX HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDFLEX HOLDINGS LTD has no effect on the direction of Nasdaq i.e., Nasdaq and REDFLEX HOLDINGS go up and down completely randomly.
Pair Corralation between Nasdaq and REDFLEX HOLDINGS
Given the investment horizon of 90 days Nasdaq is expected to generate 6.71 times less return on investment than REDFLEX HOLDINGS. But when comparing it to its historical volatility, Nasdaq Inc is 11.52 times less risky than REDFLEX HOLDINGS. It trades about 0.07 of its potential returns per unit of risk. REDFLEX HOLDINGS LTD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 30.00 in REDFLEX HOLDINGS LTD on November 27, 2024 and sell it today you would lose (26.57) from holding REDFLEX HOLDINGS LTD or give up 88.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. REDFLEX HOLDINGS LTD
Performance |
| Timeline |
| Nasdaq Inc |
| REDFLEX HOLDINGS LTD |
Nasdaq and REDFLEX HOLDINGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and REDFLEX HOLDINGS
The main advantage of trading using opposite Nasdaq and REDFLEX HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, REDFLEX HOLDINGS 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 REDFLEX HOLDINGS will offset losses from the drop in REDFLEX HOLDINGS's long position.The idea behind Nasdaq Inc and REDFLEX HOLDINGS LTD 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.| REDFLEX HOLDINGS vs. Lincoln Electric Holdings | REDFLEX HOLDINGS vs. Toro Co | REDFLEX HOLDINGS vs. ioneer Ltd American | REDFLEX HOLDINGS vs. RBC Bearings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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