Correlation Between Grey Cloak and Red Light

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

By analyzing existing cross correlation between Grey Cloak Tech and Red Light Holland, you can compare the effects of market volatilities on Grey Cloak and Red Light 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 Grey Cloak with a short position of Red Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grey Cloak and Red Light.

Diversification Opportunities for Grey Cloak and Red Light

0.05

Correlation Coefficient

Grey Cloak  Red Light

Significant diversification

The 3 months correlation between Grey and Red is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Grey Cloak Tech and Red Light Holland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Light Holland and Grey Cloak 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 Grey Cloak Tech are associated (or correlated) with Red Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Light Holland has no effect on the direction of Grey Cloak i.e., Grey Cloak and Red Light go up and down completely randomly.

Pair Corralation between Grey Cloak and Red Light

Given the investment horizon of 90 days Grey Cloak Tech is expected to generate 1.24 times more return on investment than Red Light. However, Grey Cloak is 1.24 times more volatile than Red Light Holland. It trades about -0.01 of its potential returns per unit of risk. Red Light Holland is currently generating about -0.03 per unit of risk. If you would invest  251.00  in Grey Cloak Tech on December 27, 2024 and sell it today you would lose (59.00) from holding Grey Cloak Tech or give up 23.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Grey Cloak Tech  vs.  Red Light Holland

Grey Cloak Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grey Cloak Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Red Light Holland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Light Holland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grey Cloak and Red Light

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

The idea behind Grey Cloak Tech and Red Light Holland 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.