Correlation Between Red Cat and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Red Cat and Johnson Matthey 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 Johnson Matthey 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 Johnson Matthey PLC, you can compare the effects of market volatilities on Red Cat and Johnson Matthey 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 Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Johnson Matthey.
Diversification Opportunities for Red Cat and Johnson Matthey
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Johnson is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Red Cat i.e., Red Cat and Johnson Matthey go up and down completely randomly.
Pair Corralation between Red Cat and Johnson Matthey
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 3.92 times more return on investment than Johnson Matthey. However, Red Cat is 3.92 times more volatile than Johnson Matthey PLC. It trades about 0.52 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.25 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. Johnson Matthey PLC
Performance |
| Timeline |
| Red Cat Holdings |
| Johnson Matthey PLC |
Red Cat and Johnson Matthey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Johnson Matthey
The main advantage of trading using opposite Red Cat and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Johnson Matthey 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 Johnson Matthey will offset losses from the drop in Johnson Matthey's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
| Johnson Matthey vs. Sensient Technologies | Johnson Matthey vs. Koppers Holdings | Johnson Matthey vs. Axalta Coating Systems | Johnson Matthey vs. Select Energy Services |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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