Correlation Between Red Cat and Scotch Creek
Can any of the company-specific risk be diversified away by investing in both Red Cat and Scotch Creek 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 Scotch Creek 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 Scotch Creek Ventures, you can compare the effects of market volatilities on Red Cat and Scotch Creek 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 Scotch Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Scotch Creek.
Diversification Opportunities for Red Cat and Scotch Creek
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Red and Scotch is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Scotch Creek Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotch Creek Ventures 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 Scotch Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotch Creek Ventures has no effect on the direction of Red Cat i.e., Red Cat and Scotch Creek go up and down completely randomly.
Pair Corralation between Red Cat and Scotch Creek
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 0.56 times more return on investment than Scotch Creek. However, Red Cat Holdings is 1.77 times less risky than Scotch Creek. It trades about 0.1 of its potential returns per unit of risk. Scotch Creek Ventures is currently generating about 0.0 per unit of risk. If you would invest 114.00 in Red Cat Holdings on August 28, 2024 and sell it today you would earn a total of 847.00 from holding Red Cat Holdings or generate 742.98% 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. Scotch Creek Ventures
Performance |
| Timeline |
| Red Cat Holdings |
| Scotch Creek Ventures |
Red Cat and Scotch Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Scotch Creek
The main advantage of trading using opposite Red Cat and Scotch Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Scotch Creek 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 Scotch Creek will offset losses from the drop in Scotch Creek's long position.The idea behind Red Cat Holdings and Scotch Creek Ventures 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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