Correlation Between Red Cat and Coloplast A/S
Can any of the company-specific risk be diversified away by investing in both Red Cat and Coloplast A/S 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 Coloplast A/S 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 Coloplast AS, you can compare the effects of market volatilities on Red Cat and Coloplast A/S 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 Coloplast A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Coloplast A/S.
Diversification Opportunities for Red Cat and Coloplast A/S
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Coloplast is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A/S 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 Coloplast A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A/S has no effect on the direction of Red Cat i.e., Red Cat and Coloplast A/S go up and down completely randomly.
Pair Corralation between Red Cat and Coloplast A/S
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 5.39 times more return on investment than Coloplast A/S. However, Red Cat is 5.39 times more volatile than Coloplast AS. It trades about 0.61 of its potential returns per unit of risk. Coloplast AS is currently generating about -0.1 per unit of risk. If you would invest 306.00 in Red Cat Holdings on August 28, 2024 and sell it today you would earn a total of 655.00 from holding Red Cat Holdings or generate 214.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Cat Holdings vs. Coloplast AS
Performance |
| Timeline |
| Red Cat Holdings |
| Coloplast A/S |
Red Cat and Coloplast A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Coloplast A/S
The main advantage of trading using opposite Red Cat and Coloplast A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Coloplast A/S 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 Coloplast A/S will offset losses from the drop in Coloplast A/S's long position.The idea behind Red Cat Holdings and Coloplast AS 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.| Coloplast A/S vs. Sysmex Corp | Coloplast A/S vs. Straumann Holding AG | Coloplast A/S vs. Essilor International SA | Coloplast A/S vs. EssilorLuxottica Socit anonyme |
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.
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |