Correlation Between Redwire Corp and Blacksky Technology

Can any of the company-specific risk be diversified away by investing in both Redwire Corp and Blacksky Technology 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 Redwire Corp and Blacksky Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Redwire Corp and Blacksky Technology, you can compare the effects of market volatilities on Redwire Corp and Blacksky Technology 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 Redwire Corp with a short position of Blacksky Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwire Corp and Blacksky Technology.

Diversification Opportunities for Redwire Corp and Blacksky Technology

0.95

Correlation Coefficient

Redwire Corp  Blacksky Technology

Almost no diversification

The 3 months correlation between Redwire and Blacksky is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Redwire Corp and Blacksky Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blacksky Technology and Redwire Corp 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 Redwire Corp are associated (or correlated) with Blacksky Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blacksky Technology has no effect on the direction of Redwire Corp i.e., Redwire Corp and Blacksky Technology go up and down completely randomly.

Pair Corralation between Redwire Corp and Blacksky Technology

Considering the 90-day investment horizon Redwire Corp is expected to generate 1.03 times less return on investment than Blacksky Technology. But when comparing it to its historical volatility, Redwire Corp is 1.26 times less risky than Blacksky Technology. It trades about 0.22 of its potential returns per unit of risk. Blacksky Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  576.00  in Blacksky Technology on September 16, 2024 and sell it today you would earn a total of  475.00  from holding Blacksky Technology or generate 82.47% return on investment over 90 days.

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

Redwire Corp  vs.  Blacksky Technology

Redwire Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Redwire Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Redwire Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Blacksky Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blacksky Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Blacksky Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Redwire Corp and Blacksky Technology

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

The idea behind Redwire Corp and Blacksky Technology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.