Correlation Between Red Cat and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both Red Cat and Vestas Wind 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 Vestas Wind 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 Vestas Wind Systems, you can compare the effects of market volatilities on Red Cat and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Vestas Wind.
Diversification Opportunities for Red Cat and Vestas Wind
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Vestas is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Red Cat i.e., Red Cat and Vestas Wind go up and down completely randomly.
Pair Corralation between Red Cat and Vestas Wind
Given the investment horizon of 90 days Red Cat Holdings is expected to generate 2.31 times more return on investment than Vestas Wind. However, Red Cat is 2.31 times more volatile than Vestas Wind Systems. It trades about 0.54 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.23 per unit of risk. If you would invest 317.00 in Red Cat Holdings on August 31, 2024 and sell it today you would earn a total of 610.00 from holding Red Cat Holdings or generate 192.43% 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. Vestas Wind Systems
Performance |
| Timeline |
| Red Cat Holdings |
| Vestas Wind Systems |
Red Cat and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Cat and Vestas Wind
The main advantage of trading using opposite Red Cat and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Cat position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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