Correlation Between Red Cat and TransAct Technologies

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

Diversification Opportunities for Red Cat and TransAct Technologies

0.59

Correlation Coefficient

Red Cat  TransAct Technologies

Very weak diversification

The 3 months correlation between Red and TransAct is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and TransAct Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAct 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 TransAct Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAct Technologies has no effect on the direction of Red Cat i.e., Red Cat and TransAct Technologies go up and down completely randomly.

Pair Corralation between Red Cat and TransAct Technologies

Given the investment horizon of 90 days Red Cat Holdings is expected to under-perform the TransAct Technologies. In addition to that, Red Cat is 3.17 times more volatile than TransAct Technologies Incorporated. It trades about -0.16 of its total potential returns per unit of risk. TransAct Technologies Incorporated is currently generating about -0.05 per unit of volatility. If you would invest  415.00  in TransAct Technologies Incorporated on December 28, 2024 and sell it today you would lose (32.00) from holding TransAct Technologies Incorporated or give up 7.71% of portfolio value over 90 days.

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

Red Cat Holdings  vs.  TransAct Technologies Incorpor

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.

TransAct Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days TransAct Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Red Cat and TransAct Technologies

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

The idea behind Red Cat Holdings and TransAct Technologies Incorporated 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .