Correlation Between Red Cat and Adecco Group

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

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

Diversification Opportunities for Red Cat and Adecco Group

-0.55

Correlation Coefficient

Red Cat  Adecco Group

Excellent diversification

The 3 months correlation between Red and Adecco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Adecco Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecco Group AG and Red Cat 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 Red Cat Holdings are associated (or correlated) with Adecco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecco Group AG has no effect on the direction of Red Cat i.e., Red Cat and Adecco Group go up and down completely randomly.

Pair Corralation between Red Cat and Adecco Group

Given the investment horizon of 90 days Red Cat Holdings is expected to under-perform the Adecco Group. In addition to that, Red Cat is 2.06 times more volatile than Adecco Group AG. It trades about -0.16 of its total potential returns per unit of risk. Adecco Group AG is currently generating about 0.07 per unit of volatility. If you would invest  2,545  in Adecco Group AG on December 28, 2024 and sell it today you would earn a total of  295.00  from holding Adecco Group AG or generate 11.59% return on investment over 90 days.

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

Red Cat Holdings  vs.  Adecco Group AG

Red Cat Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Cat Holdings 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Adecco Group AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adecco Group AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Adecco Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and Adecco Group

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

The idea behind Red Cat Holdings and Adecco Group AG 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.