Correlation Between Red Cat and Key Tronic

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

Diversification Opportunities for Red Cat and Key Tronic

0.13

Correlation Coefficient

Red Cat  Key Tronic

Average diversification

The 3 months correlation between Red and Key is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Key Tronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Tronic 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 Key Tronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Key Tronic has no effect on the direction of Red Cat i.e., Red Cat and Key Tronic go up and down completely randomly.

Pair Corralation between Red Cat and Key Tronic

Given the investment horizon of 90 days Red Cat Holdings is expected to generate 3.98 times more return on investment than Key Tronic. However, Red Cat is 3.98 times more volatile than Key Tronic. It trades about 0.28 of its potential returns per unit of risk. Key Tronic is currently generating about 0.17 per unit of risk. If you would invest  295.00  in Red Cat Holdings on September 2, 2024 and sell it today you would earn a total of  882.00  from holding Red Cat Holdings or generate 298.98% return on investment over 90 days.

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

Red Cat Holdings  vs.  Key Tronic

Red Cat Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 22 (%) 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.

Key Tronic

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Key Tronic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Key Tronic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and Key Tronic

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

The idea behind Red Cat Holdings and Key Tronic 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.