Correlation Between REDLANG and KEY

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Can any of the company-specific risk be diversified away by investing in both REDLANG and KEY 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 REDLANG and KEY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REDLANG and KEY, you can compare the effects of market volatilities on REDLANG and KEY 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 REDLANG with a short position of KEY. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDLANG and KEY.

Diversification Opportunities for REDLANG and KEY

REDLANGKEYDiversified AwayREDLANGKEYDiversified Away100%
0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between REDLANG and KEY is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding REDLANG and KEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY and REDLANG 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 REDLANG are associated (or correlated) with KEY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY has no effect on the direction of REDLANG i.e., REDLANG and KEY go up and down completely randomly.

Pair Corralation between REDLANG and KEY

Assuming the 90 days trading horizon REDLANG is expected to generate 1.34 times more return on investment than KEY. However, REDLANG is 1.34 times more volatile than KEY. It trades about 0.08 of its potential returns per unit of risk. KEY is currently generating about 0.06 per unit of risk. If you would invest  0.09  in REDLANG on November 23, 2024 and sell it today you would earn a total of  0.00  from holding REDLANG or generate 1.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

REDLANG  vs.  KEY

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -80-60-40-2002040
JavaScript chart by amCharts 3.21.15REDLANG KEY
       Timeline  
REDLANG 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in REDLANG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, REDLANG reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.00080.0010.00120.00140.0016
KEY 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days KEY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for KEY shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0010.00150.0020.00250.0030.0035

REDLANG and KEY Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-38.91-29.14-19.37-9.60.09.7119.5929.4739.35 0.002400.002450.002500.002550.002600.00265
JavaScript chart by amCharts 3.21.15REDLANG KEY
       Returns  

Pair Trading with REDLANG and KEY

The main advantage of trading using opposite REDLANG and KEY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REDLANG position performs unexpectedly, KEY 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 KEY will offset losses from the drop in KEY's long position.
The idea behind REDLANG and KEY 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.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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