Correlation Between Red Cat and Lisi SA
Can any of the company-specific risk be diversified away by investing in both Red Cat and Lisi SA 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 Lisi SA 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 Lisi SA, you can compare the effects of market volatilities on Red Cat and Lisi SA 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 Lisi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Lisi SA.
Diversification Opportunities for Red Cat and Lisi SA
Very good diversification
The 3 months correlation between Red and Lisi is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Lisi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisi SA 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 Lisi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisi SA has no effect on the direction of Red Cat i.e., Red Cat and Lisi SA go up and down completely randomly.
Pair Corralation between Red Cat and Lisi SA
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 11.62 times more return on investment than Lisi SA. However, Red Cat is 11.62 times more volatile than Lisi SA. It trades about 0.65 of its potential returns per unit of risk. Lisi SA is currently generating about -0.22 per unit of risk. If you would invest 306.00 in Red Cat Holdings on September 1, 2024 and sell it today you would earn a total of 871.00 from holding Red Cat Holdings or generate 284.64% 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. Lisi SA
Performance |
| Timeline |
| Red Cat Holdings |
| Lisi SA |
Red Cat and Lisi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Lisi SA
The main advantage of trading using opposite Red Cat and Lisi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Lisi SA 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 Lisi SA will offset losses from the drop in Lisi SA's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
| Lisi SA vs. Curtiss Wright | Lisi SA vs. Mercury Systems | Lisi SA vs. AAR Corp | Lisi SA vs. Ducommun Incorporated |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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