Correlation Between Red River and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Red River and SPDR Dow 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 River and SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red River Bancshares and SPDR Dow Jones, you can compare the effects of market volatilities on Red River and SPDR Dow 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 River with a short position of SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red River and SPDR Dow.
Diversification Opportunities for Red River and SPDR Dow
Pay attention - limited upside
The 3 months correlation between Red and SPDR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones and Red River 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 River Bancshares are associated (or correlated) with SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Red River i.e., Red River and SPDR Dow go up and down completely randomly.
Pair Corralation between Red River and SPDR Dow
Given the investment horizon of 90 days Red River Bancshares is expected to generate 1.95 times more return on investment than SPDR Dow. However, Red River is 1.95 times more volatile than SPDR Dow Jones. It trades about 0.03 of its potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.01 per unit of risk. If you would invest 5,329 in Red River Bancshares on August 31, 2024 and sell it today you would earn a total of 676.00 from holding Red River Bancshares or generate 12.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red River Bancshares vs. SPDR Dow Jones
Performance |
| Timeline |
| Red River Bancshares |
| SPDR Dow Jones |
Red River and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red River and SPDR Dow
The main advantage of trading using opposite Red River and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red River position performs unexpectedly, SPDR Dow 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 SPDR Dow will offset losses from the drop in SPDR Dow's long position.| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck Bancorp |
| SPDR Dow vs. South Plains Financial | SPDR Dow vs. Red River Bancshares | SPDR Dow vs. NI Holdings | SPDR Dow vs. Western New England |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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