Correlation Between Innoviz Technologies and Red Cat
Can any of the company-specific risk be diversified away by investing in both Innoviz Technologies 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 Innoviz Technologies and Red Cat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innoviz Technologies and Red Cat Holdings, you can compare the effects of market volatilities on Innoviz Technologies 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 Innoviz Technologies with a short position of Red Cat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innoviz Technologies and Red Cat.
Diversification Opportunities for Innoviz Technologies and Red Cat
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Innoviz and Red is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Innoviz Technologies 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 Innoviz Technologies 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 Innoviz Technologies 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 Innoviz Technologies i.e., Innoviz Technologies and Red Cat go up and down completely randomly.
Pair Corralation between Innoviz Technologies and Red Cat
Assuming the 90 days horizon Innoviz Technologies is expected to generate 1.54 times more return on investment than Red Cat. However, Innoviz Technologies is 1.54 times more volatile than Red Cat Holdings. It trades about 0.05 of its potential returns per unit of risk. Red Cat Holdings is currently generating about -0.05 per unit of risk. If you would invest 9.39 in Innoviz Technologies on December 1, 2024 and sell it today you would lose (1.17) from holding Innoviz Technologies or give up 12.46% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Innoviz Technologies vs. Red Cat Holdings
Performance |
Timeline |
Innoviz Technologies |
Red Cat Holdings |
Innoviz Technologies and Red Cat Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Innoviz Technologies and Red Cat
The main advantage of trading using opposite Innoviz Technologies and Red Cat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innoviz Technologies 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 Innoviz Technologies 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.Red Cat vs. Quantum Computing | Red Cat vs. Rigetti Computing | Red Cat vs. D Wave Quantum | Red Cat vs. AstroNova |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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