Correlation Between Red Cat and Innoviz Technologies

Can any of the company-specific risk be diversified away by investing in both Red Cat and Innoviz Technologies 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 Innoviz Technologies 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 Innoviz Technologies, you can compare the effects of market volatilities on Red Cat and Innoviz Technologies 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 Innoviz Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and Innoviz Technologies.

Diversification Opportunities for Red Cat and Innoviz Technologies

-0.19

Correlation Coefficient

Red Cat  Innoviz Technologies

Good diversification

The 3 months correlation between Red and Innoviz is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Innoviz Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innoviz Technologies 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 Innoviz Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innoviz Technologies has no effect on the direction of Red Cat i.e., Red Cat and Innoviz Technologies go up and down completely randomly.

Pair Corralation between Red Cat and Innoviz Technologies

Given the investment horizon of 90 days Red Cat is expected to generate 7.54 times less return on investment than Innoviz Technologies. But when comparing it to its historical volatility, Red Cat Holdings is 10.79 times less risky than Innoviz Technologies. It trades about 0.1 of its potential returns per unit of risk. Innoviz Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Innoviz Technologies on September 19, 2024 and sell it today you would lose (118.00) from holding Innoviz Technologies or give up 85.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.14%
Values	Daily Returns

Red Cat Holdings  vs.  Innoviz Technologies

Red Cat Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 19 (%) 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.

Innoviz Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innoviz Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Innoviz Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and Innoviz Technologies

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

The idea behind Red Cat Holdings and Innoviz Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.