Correlation Between Cass Information and Redcare Pharmacy

Can any of the company-specific risk be diversified away by investing in both Cass Information and Redcare Pharmacy 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 Cass Information and Redcare Pharmacy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cass Information Systems and Redcare Pharmacy NV, you can compare the effects of market volatilities on Cass Information and Redcare Pharmacy 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 Cass Information with a short position of Redcare Pharmacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cass Information and Redcare Pharmacy.

Diversification Opportunities for Cass Information and Redcare Pharmacy

0.01

Correlation Coefficient

Cass Information  Redcare Pharmacy

Significant diversification

The 3 months correlation between Cass and Redcare is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and Redcare Pharmacy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redcare Pharmacy and Cass Information 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 Cass Information Systems are associated (or correlated) with Redcare Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redcare Pharmacy has no effect on the direction of Cass Information i.e., Cass Information and Redcare Pharmacy go up and down completely randomly.

Pair Corralation between Cass Information and Redcare Pharmacy

Assuming the 90 days horizon Cass Information Systems is expected to generate 0.46 times more return on investment than Redcare Pharmacy. However, Cass Information Systems is 2.17 times less risky than Redcare Pharmacy. It trades about 0.0 of its potential returns per unit of risk. Redcare Pharmacy NV is currently generating about -0.02 per unit of risk. If you would invest  3,992  in Cass Information Systems on December 22, 2024 and sell it today you would lose (32.00) from holding Cass Information Systems or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cass Information Systems  vs.  Redcare Pharmacy NV

Cass Information Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cass Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cass Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Redcare Pharmacy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redcare Pharmacy NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Redcare Pharmacy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cass Information and Redcare Pharmacy

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

The idea behind Cass Information Systems and Redcare Pharmacy NV 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.