Correlation Between Red Cat and Haleon Plc
Can any of the company-specific risk be diversified away by investing in both Red Cat and Haleon Plc 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 Haleon Plc 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 Haleon plc, you can compare the effects of market volatilities on Red Cat and Haleon Plc 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 Haleon Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Haleon Plc.
Diversification Opportunities for Red Cat and Haleon Plc
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Haleon is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Haleon plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon 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 Haleon Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon plc has no effect on the direction of Red Cat i.e., Red Cat and Haleon Plc go up and down completely randomly.
Pair Corralation between Red Cat and Haleon Plc
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 6.36 times more return on investment than Haleon Plc. However, Red Cat is 6.36 times more volatile than Haleon plc. It trades about 0.63 of its potential returns per unit of risk. Haleon plc is currently generating about -0.03 per unit of risk. If you would invest 306.00 in Red Cat Holdings on August 27, 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. Haleon plc
Performance |
| Timeline |
| Red Cat Holdings |
| Haleon plc |
Red Cat and Haleon Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Haleon Plc
The main advantage of trading using opposite Red Cat and Haleon Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Haleon Plc 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 Haleon Plc will offset losses from the drop in Haleon Plc's long position.The idea behind Red Cat Holdings and Haleon plc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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