Correlation Between Red Cat and TransAct Technologies
Can any of the company-specific risk be diversified away by investing in both Red Cat and TransAct Technologies 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 TransAct Technologies 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 TransAct Technologies Incorporated, you can compare the effects of market volatilities on Red Cat and TransAct Technologies 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 TransAct Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and TransAct Technologies.
Diversification Opportunities for Red Cat and TransAct Technologies
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and TransAct is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and TransAct Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAct Technologies 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 TransAct Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAct Technologies has no effect on the direction of Red Cat i.e., Red Cat and TransAct Technologies go up and down completely randomly.
Pair Corralation between Red Cat and TransAct Technologies
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 2.0 times more return on investment than TransAct Technologies. However, Red Cat is 2.0 times more volatile than TransAct Technologies Incorporated. It trades about 0.12 of its potential returns per unit of risk. TransAct Technologies Incorporated is currently generating about -0.03 per unit of risk. If you would invest 95.00 in Red Cat Holdings on August 27, 2024 and sell it today you would earn a total of 802.00 from holding Red Cat Holdings or generate 844.21% 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. TransAct Technologies Incorpor
Performance |
| Timeline |
| Red Cat Holdings |
| TransAct Technologies |
Red Cat and TransAct Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and TransAct Technologies
The main advantage of trading using opposite Red Cat and TransAct Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, TransAct Technologies 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 TransAct Technologies will offset losses from the drop in TransAct Technologies' long position.The idea behind Red Cat Holdings and TransAct Technologies Incorporated 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.| TransAct Technologies vs. AstroNova | TransAct Technologies vs. Key Tronic | TransAct Technologies vs. FARO Technologies | TransAct Technologies vs. Hooker Furniture |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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