Correlation Between Red Cat and Golden Lake
Can any of the company-specific risk be diversified away by investing in both Red Cat and Golden Lake 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 Golden Lake 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 Golden Lake Exploration, you can compare the effects of market volatilities on Red Cat and Golden Lake 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 Golden Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Golden Lake.
Diversification Opportunities for Red Cat and Golden Lake
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Golden is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Golden Lake Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Lake Exploration 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 Golden Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Lake Exploration has no effect on the direction of Red Cat i.e., Red Cat and Golden Lake go up and down completely randomly.
Pair Corralation between Red Cat and Golden Lake
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 0.66 times more return on investment than Golden Lake. However, Red Cat Holdings is 1.51 times less risky than Golden Lake. It trades about 0.09 of its potential returns per unit of risk. Golden Lake Exploration is currently generating about 0.03 per unit of risk. If you would invest 115.00 in Red Cat Holdings on August 29, 2024 and sell it today you would earn a total of 721.00 from holding Red Cat Holdings or generate 626.96% 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. Golden Lake Exploration
Performance |
| Timeline |
| Red Cat Holdings |
| Golden Lake Exploration |
Red Cat and Golden Lake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Golden Lake
The main advantage of trading using opposite Red Cat and Golden Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Golden Lake 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 Golden Lake will offset losses from the drop in Golden Lake's long position.The idea behind Red Cat Holdings and Golden Lake Exploration 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.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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