Correlation Between Red Cat and Quantum

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

Diversification Opportunities for Red Cat and Quantum

0.77

Correlation Coefficient

Red Cat  Quantum

Poor diversification

The 3 months correlation between Red and Quantum is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum 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 Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum has no effect on the direction of Red Cat i.e., Red Cat and Quantum go up and down completely randomly.

Pair Corralation between Red Cat and Quantum

Given the investment horizon of 90 days Red Cat Holdings is expected to generate 0.55 times more return on investment than Quantum. However, Red Cat Holdings is 1.82 times less risky than Quantum. It trades about -0.14 of its potential returns per unit of risk. Quantum is currently generating about -0.1 per unit of risk. If you would invest  1,341  in Red Cat Holdings on December 25, 2024 and sell it today you would lose (743.00) from holding Red Cat Holdings or give up 55.41% of portfolio value over 90 days.

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

Red Cat Holdings  vs.  Quantum

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.

Quantum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Red Cat and Quantum

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

The idea behind Red Cat Holdings and Quantum 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.