Correlation Between REDFLEX HOLDINGS and European Metals
Can any of the company-specific risk be diversified away by investing in both REDFLEX HOLDINGS and European Metals 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 European Metals 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 European Metals Holdings, you can compare the effects of market volatilities on REDFLEX HOLDINGS and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDFLEX HOLDINGS and European Metals.
Diversification Opportunities for REDFLEX HOLDINGS and European Metals
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between REDFLEX and European is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and European Metals go up and down completely randomly.
Pair Corralation between REDFLEX HOLDINGS and European Metals
Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 2.22 times more return on investment than European Metals. However, REDFLEX HOLDINGS is 2.22 times more volatile than European Metals Holdings. It trades about 0.05 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.03 per unit of risk. If you would invest 14.00 in REDFLEX HOLDINGS LTD on September 1, 2024 and sell it today you would lose (11.21) from holding REDFLEX HOLDINGS LTD or give up 80.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
REDFLEX HOLDINGS LTD vs. European Metals Holdings
Performance |
| Timeline |
| REDFLEX HOLDINGS LTD |
| European Metals Holdings |
REDFLEX HOLDINGS and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REDFLEX HOLDINGS and European Metals
The main advantage of trading using opposite REDFLEX HOLDINGS and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REDFLEX HOLDINGS position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| REDFLEX HOLDINGS vs. ATT Inc | REDFLEX HOLDINGS vs. Merck Company | REDFLEX HOLDINGS vs. Walt Disney | REDFLEX HOLDINGS vs. Caterpillar |
| European Metals vs. ATT Inc | European Metals vs. Merck Company | European Metals vs. Walt Disney | European Metals vs. Caterpillar |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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