Correlation Between Dolby Laboratories and Red Cat

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

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

Diversification Opportunities for Dolby Laboratories and Red Cat

-0.45

Correlation Coefficient

Dolby Laboratories  Red Cat

Very good diversification

The 3 months correlation between Dolby and Red is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories 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 Dolby Laboratories 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 Dolby Laboratories 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 Dolby Laboratories i.e., Dolby Laboratories and Red Cat go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Red Cat

Considering the 90-day investment horizon Dolby Laboratories is expected to generate 0.2 times more return on investment than Red Cat. However, Dolby Laboratories is 4.89 times less risky than Red Cat. It trades about 0.05 of its potential returns per unit of risk. Red Cat Holdings is currently generating about -0.14 per unit of risk. If you would invest  7,828  in Dolby Laboratories on December 26, 2024 and sell it today you would earn a total of  346.00  from holding Dolby Laboratories or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Dolby Laboratories  vs.  Red Cat Holdings

Dolby Laboratories

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Dolby Laboratories is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Red Cat Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Cat Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dolby Laboratories and Red Cat

The main advantage of trading using opposite Dolby Laboratories and Red Cat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolby Laboratories 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 Dolby Laboratories 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.