Correlation Between Red Cat and AstroNova
Can any of the company-specific risk be diversified away by investing in both Red Cat and AstroNova 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 Red Cat and AstroNova into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Cat Holdings and AstroNova, you can compare the effects of market volatilities on Red Cat and AstroNova 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 Red Cat with a short position of AstroNova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and AstroNova.
Diversification Opportunities for Red Cat and AstroNova
Modest diversification
The 3 months correlation between Red and AstroNova is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and AstroNova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstroNova and Red Cat 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 Red Cat Holdings are associated (or correlated) with AstroNova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstroNova has no effect on the direction of Red Cat i.e., Red Cat and AstroNova go up and down completely randomly.
Pair Corralation between Red Cat and AstroNova
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 3.16 times more return on investment than AstroNova. However, Red Cat is 3.16 times more volatile than AstroNova. It trades about 0.12 of its potential returns per unit of risk. AstroNova is currently generating about 0.0 per unit of risk. If you would invest 95.00 in Red Cat Holdings on August 27, 2024 and sell it today you would earn a total of 802.00 from holding Red Cat Holdings or generate 844.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Cat Holdings vs. AstroNova
Performance |
| Timeline |
| Red Cat Holdings |
| AstroNova |
Red Cat and AstroNova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and AstroNova
The main advantage of trading using opposite Red Cat and AstroNova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, AstroNova 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 AstroNova will offset losses from the drop in AstroNova's long position.The idea behind Red Cat Holdings and AstroNova 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.| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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