Correlation Between Acutus Medical and Red Cat

Can any of the company-specific risk be diversified away by investing in both Acutus Medical and Red Cat 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 Acutus Medical and Red Cat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Acutus Medical and Red Cat Holdings, you can compare the effects of market volatilities on Acutus Medical and Red Cat 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 Acutus Medical with a short position of Red Cat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acutus Medical and Red Cat.

Diversification Opportunities for Acutus Medical and Red Cat

-0.27

Correlation Coefficient

Acutus Medical  Red Cat

Very good diversification

The 3 months correlation between Acutus and Red is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Acutus Medical and Red Cat Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Cat Holdings and Acutus Medical 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 Acutus Medical are associated (or correlated) with Red Cat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Cat Holdings has no effect on the direction of Acutus Medical i.e., Acutus Medical and Red Cat go up and down completely randomly.

Pair Corralation between Acutus Medical and Red Cat

Given the investment horizon of 90 days Acutus Medical is expected to under-perform the Red Cat. But the stock apears to be less risky and, when comparing its historical volatility, Acutus Medical is 1.08 times less risky than Red Cat. The stock trades about -0.05 of its potential returns per unit of risk. The Red Cat Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Red Cat Holdings on September 25, 2024 and sell it today you would earn a total of  1,104  from holding Red Cat Holdings or generate 1200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.97%
Values	Daily Returns

Acutus Medical  vs.  Red Cat Holdings

Acutus Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acutus Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Acutus Medical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Red Cat Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Red Cat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acutus Medical and Red Cat

The main advantage of trading using opposite Acutus Medical and Red Cat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acutus Medical position performs unexpectedly, Red Cat 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 Red Cat will offset losses from the drop in Red Cat's long position.

The idea behind Acutus Medical and Red Cat Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.