Correlation Between REDFLEX HOLDINGS and ACME Lithium
Can any of the company-specific risk be diversified away by investing in both REDFLEX HOLDINGS and ACME Lithium 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 REDFLEX HOLDINGS and ACME Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REDFLEX HOLDINGS LTD and ACME Lithium, you can compare the effects of market volatilities on REDFLEX HOLDINGS and ACME Lithium 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 REDFLEX HOLDINGS with a short position of ACME Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDFLEX HOLDINGS and ACME Lithium.
Diversification Opportunities for REDFLEX HOLDINGS and ACME Lithium
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between REDFLEX and ACME is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and ACME Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACME Lithium and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS LTD are associated (or correlated) with ACME Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACME Lithium has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and ACME Lithium go up and down completely randomly.
Pair Corralation between REDFLEX HOLDINGS and ACME Lithium
Assuming the 90 days horizon REDFLEX HOLDINGS is expected to generate 1.63 times less return on investment than ACME Lithium. In addition to that, REDFLEX HOLDINGS is 1.26 times more volatile than ACME Lithium. It trades about 0.04 of its total potential returns per unit of risk. ACME Lithium is currently generating about 0.09 per unit of volatility. If you would invest 3.20 in ACME Lithium on November 28, 2024 and sell it today you would earn a total of 0.26 from holding ACME Lithium or generate 8.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REDFLEX HOLDINGS LTD vs. ACME Lithium
Performance |
| Timeline |
| REDFLEX HOLDINGS LTD |
| ACME Lithium |
REDFLEX HOLDINGS and ACME Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REDFLEX HOLDINGS and ACME Lithium
The main advantage of trading using opposite REDFLEX HOLDINGS and ACME Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REDFLEX HOLDINGS position performs unexpectedly, ACME Lithium 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 ACME Lithium will offset losses from the drop in ACME Lithium's long position.| REDFLEX HOLDINGS vs. Toro Co | REDFLEX HOLDINGS vs. Skechers USA | REDFLEX HOLDINGS vs. Pinterest | REDFLEX HOLDINGS vs. Coupang LLC |
| ACME Lithium vs. United Lithium Corp | ACME Lithium vs. Alpha Copper Corp | ACME Lithium vs. REDFLEX HOLDINGS LTD | ACME Lithium vs. Global Helium Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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