Correlation Between Planet Labs and Redwire Corp

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

By analyzing existing cross correlation between Planet Labs PBC and Redwire Corp, you can compare the effects of market volatilities on Planet Labs and Redwire Corp 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 Planet Labs with a short position of Redwire Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Labs and Redwire Corp.

Diversification Opportunities for Planet Labs and Redwire Corp

0.86

Correlation Coefficient

Planet Labs  Redwire Corp

Very poor diversification

The 3 months correlation between Planet and Redwire is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and Redwire Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwire Corp and Planet Labs 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 Planet Labs PBC are associated (or correlated) with Redwire Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwire Corp has no effect on the direction of Planet Labs i.e., Planet Labs and Redwire Corp go up and down completely randomly.

Pair Corralation between Planet Labs and Redwire Corp

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 0.64 times more return on investment than Redwire Corp. However, Planet Labs PBC is 1.56 times less risky than Redwire Corp. It trades about -0.01 of its potential returns per unit of risk. Redwire Corp is currently generating about -0.06 per unit of risk. If you would invest  421.00  in Planet Labs PBC on December 28, 2024 and sell it today you would lose (49.00) from holding Planet Labs PBC or give up 11.64% of portfolio value over 90 days.

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

Planet Labs PBC  vs.  Redwire Corp

Planet Labs PBC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Labs PBC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Planet Labs is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Redwire Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redwire Corp 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 fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Planet Labs and Redwire Corp

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

The idea behind Planet Labs PBC and Redwire Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.