Correlation Between Red Cat and Covestro ADR
Can any of the company-specific risk be diversified away by investing in both Red Cat and Covestro ADR 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 Covestro ADR 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 Covestro ADR, you can compare the effects of market volatilities on Red Cat and Covestro ADR 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 Covestro ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Covestro ADR.
Diversification Opportunities for Red Cat and Covestro ADR
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and Covestro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Covestro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro ADR 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 Covestro ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro ADR has no effect on the direction of Red Cat i.e., Red Cat and Covestro ADR go up and down completely randomly.
Pair Corralation between Red Cat and Covestro ADR
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 8.46 times more return on investment than Covestro ADR. However, Red Cat is 8.46 times more volatile than Covestro ADR. It trades about 0.25 of its potential returns per unit of risk. Covestro ADR is currently generating about 0.01 per unit of risk. If you would invest 295.00 in Red Cat Holdings on August 31, 2024 and sell it today you would earn a total of 632.00 from holding Red Cat Holdings or generate 214.24% 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. Covestro ADR
Performance |
| Timeline |
| Red Cat Holdings |
| Covestro ADR |
Red Cat and Covestro ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Covestro ADR
The main advantage of trading using opposite Red Cat and Covestro ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Covestro ADR 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 Covestro ADR will offset losses from the drop in Covestro ADR's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
| Covestro ADR vs. Symrise Ag PK | Covestro ADR vs. Fuchs Petrolub SE | Covestro ADR vs. Linde plc Ordinary | Covestro ADR vs. H B Fuller |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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