Correlation Between Red Cat and Desktop Metal
Can any of the company-specific risk be diversified away by investing in both Red Cat and Desktop Metal 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 Desktop Metal 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 Desktop Metal, you can compare the effects of market volatilities on Red Cat and Desktop Metal 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 Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Desktop Metal.
Diversification Opportunities for Red Cat and Desktop Metal
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and Desktop is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal 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 Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of Red Cat i.e., Red Cat and Desktop Metal go up and down completely randomly.
Pair Corralation between Red Cat and Desktop Metal
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 2.12 times more return on investment than Desktop Metal. However, Red Cat is 2.12 times more volatile than Desktop Metal. It trades about 0.52 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.14 per unit of risk. If you would invest 328.00 in Red Cat Holdings on August 30, 2024 and sell it today you would earn a total of 599.00 from holding Red Cat Holdings or generate 182.62% 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. Desktop Metal
Performance |
| Timeline |
| Red Cat Holdings |
| Desktop Metal |
Red Cat and Desktop Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Desktop Metal
The main advantage of trading using opposite Red Cat and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Desktop Metal 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 Desktop Metal will offset losses from the drop in Desktop Metal's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
| Desktop Metal vs. Fabrinet | Desktop Metal vs. Kimball Electronics | Desktop Metal vs. Knowles Cor | Desktop Metal vs. Ubiquiti Networks |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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