Correlation Between V2X and Redwire Corp
Can any of the company-specific risk be diversified away by investing in both V2X and Redwire Corp 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 V2X and Redwire Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between V2X Inc and Redwire Corp, you can compare the effects of market volatilities on V2X and Redwire Corp 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 V2X with a short position of Redwire Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2X and Redwire Corp.
Diversification Opportunities for V2X and Redwire Corp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between V2X and Redwire is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding V2X Inc and Redwire Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwire Corp and V2X 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 V2X Inc are associated (or correlated) with Redwire Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwire Corp has no effect on the direction of V2X i.e., V2X and Redwire Corp go up and down completely randomly.
Pair Corralation between V2X and Redwire Corp
Considering the 90-day investment horizon V2X is expected to generate 2.87 times less return on investment than Redwire Corp. But when comparing it to its historical volatility, V2X Inc is 1.77 times less risky than Redwire Corp. It trades about 0.09 of its potential returns per unit of risk. Redwire Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 517.00 in Redwire Corp on August 24, 2024 and sell it today you would earn a total of 651.00 from holding Redwire Corp or generate 125.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
V2X Inc vs. Redwire Corp
Performance |
| Timeline |
| V2X Inc |
| Redwire Corp |
V2X and Redwire Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with V2X and Redwire Corp
The main advantage of trading using opposite V2X and Redwire Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2X position performs unexpectedly, Redwire Corp 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 Redwire Corp will offset losses from the drop in Redwire Corp's long position.The idea behind V2X Inc and Redwire Corp 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.| Redwire Corp vs. Sidus Space | Redwire Corp vs. Planet Labs PBC | Redwire Corp vs. Intuitive Machines | Redwire Corp vs. Rocket Lab USA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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