Correlation Between Red Cat and VerifyMe

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

Diversification Opportunities for Red Cat and VerifyMe

-0.93

Correlation Coefficient

Red Cat  VerifyMe

Pay attention - limited upside

The 3 months correlation between Red and VerifyMe is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and VerifyMe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VerifyMe 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 VerifyMe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VerifyMe has no effect on the direction of Red Cat i.e., Red Cat and VerifyMe go up and down completely randomly.

Pair Corralation between Red Cat and VerifyMe

Given the investment horizon of 90 days Red Cat Holdings is expected to generate 1.65 times more return on investment than VerifyMe. However, Red Cat is 1.65 times more volatile than VerifyMe. It trades about 0.25 of its potential returns per unit of risk. VerifyMe is currently generating about -0.09 per unit of risk. If you would invest  113.00  in Red Cat Holdings on September 22, 2024 and sell it today you would earn a total of  962.00  from holding Red Cat Holdings or generate 851.33% return on investment over 90 days.

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

Red Cat Holdings  vs.  VerifyMe

Red Cat Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 18 (%) 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.

VerifyMe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VerifyMe 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 primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Red Cat and VerifyMe

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

The idea behind Red Cat Holdings and VerifyMe 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.