Correlation Between Quantum and Red Cat

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

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

Diversification Opportunities for Quantum and Red Cat

0.86

Correlation Coefficient

Quantum  Red Cat

Very poor diversification

The 3 months correlation between Quantum and Red is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Quantum 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 Quantum 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 Quantum 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 Quantum i.e., Quantum and Red Cat go up and down completely randomly.

Pair Corralation between Quantum and Red Cat

Given the investment horizon of 90 days Quantum is expected to generate 2.7 times more return on investment than Red Cat. However, Quantum is 2.7 times more volatile than Red Cat Holdings. It trades about 0.18 of its potential returns per unit of risk. Red Cat Holdings is currently generating about 0.21 per unit of risk. If you would invest  356.00  in Quantum on September 17, 2024 and sell it today you would earn a total of  1,441  from holding Quantum or generate 404.78% return on investment over 90 days.

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

Quantum  vs.  Red Cat Holdings

Quantum

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Red Cat Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Cat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quantum and Red Cat

The main advantage of trading using opposite Quantum and Red Cat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantum 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 Quantum 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 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.