Correlation Between Red Cat and Croda International
Can any of the company-specific risk be diversified away by investing in both Red Cat and Croda International 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 Croda International 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 Croda International PLC, you can compare the effects of market volatilities on Red Cat and Croda International 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 Croda International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Croda International.
Diversification Opportunities for Red Cat and Croda International
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Croda is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Croda International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International PLC 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International PLC has no effect on the direction of Red Cat i.e., Red Cat and Croda International go up and down completely randomly.
Pair Corralation between Red Cat and Croda International
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 4.38 times more return on investment than Croda International. However, Red Cat is 4.38 times more volatile than Croda International PLC. It trades about 0.19 of its potential returns per unit of risk. Croda International PLC is currently generating about -0.11 per unit of risk. If you would invest 312.00 in Red Cat Holdings on August 25, 2024 and sell it today you would earn a total of 418.00 from holding Red Cat Holdings or generate 133.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Cat Holdings vs. Croda International PLC
Performance |
| Timeline |
| Red Cat Holdings |
| Croda International PLC |
Red Cat and Croda International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Croda International
The main advantage of trading using opposite Red Cat and Croda International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Croda International 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 Croda International will offset losses from the drop in Croda International's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
| Croda International vs. First Graphene | Croda International vs. HUMANA INC | Croda International vs. Aquagold International | Croda International vs. Barloworld Ltd ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
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