Correlation Between Deluxe and REDFLEX HOLDINGS

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

By analyzing existing cross correlation between Deluxe and REDFLEX HOLDINGS LTD, you can compare the effects of market volatilities on Deluxe and REDFLEX HOLDINGS 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 Deluxe with a short position of REDFLEX HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and REDFLEX HOLDINGS.

Diversification Opportunities for Deluxe and REDFLEX HOLDINGS

-0.57

Correlation Coefficient

Deluxe  REDFLEX HOLDINGS

Excellent diversification

The 3 months correlation between Deluxe and REDFLEX is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and REDFLEX HOLDINGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDFLEX HOLDINGS LTD and Deluxe 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 Deluxe are associated (or correlated) with REDFLEX HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDFLEX HOLDINGS LTD has no effect on the direction of Deluxe i.e., Deluxe and REDFLEX HOLDINGS go up and down completely randomly.

Pair Corralation between Deluxe and REDFLEX HOLDINGS

Considering the 90-day investment horizon Deluxe is expected to under-perform the REDFLEX HOLDINGS. But the stock apears to be less risky and, when comparing its historical volatility, Deluxe is 7.53 times less risky than REDFLEX HOLDINGS. The stock trades about -0.21 of its potential returns per unit of risk. The REDFLEX HOLDINGS LTD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.32  in REDFLEX HOLDINGS LTD on December 21, 2024 and sell it today you would earn a total of  0.34  from holding REDFLEX HOLDINGS LTD or generate 14.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Deluxe  vs.  REDFLEX HOLDINGS LTD

Deluxe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deluxe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deluxe and REDFLEX HOLDINGS

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

The idea behind Deluxe and REDFLEX HOLDINGS LTD 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.