Correlation Between Redwire Corp and VSE

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

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

Diversification Opportunities for Redwire Corp and VSE

-0.36

Correlation Coefficient

Redwire Corp  VSE

Very good diversification

The 3 months correlation between Redwire and VSE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Redwire Corp and VSE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSE Corporation 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 VSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSE Corporation has no effect on the direction of Redwire Corp i.e., Redwire Corp and VSE go up and down completely randomly.

Pair Corralation between Redwire Corp and VSE

Considering the 90-day investment horizon Redwire Corp is expected to generate 7.29 times more return on investment than VSE. However, Redwire Corp is 7.29 times more volatile than VSE Corporation. It trades about 0.2 of its potential returns per unit of risk. VSE Corporation is currently generating about 0.23 per unit of risk. If you would invest  1,507  in Redwire Corp on October 25, 2024 and sell it today you would earn a total of  658.00  from holding Redwire Corp or generate 43.66% return on investment over 90 days.

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

Redwire Corp  vs.  VSE Corp.

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.

VSE Corporation

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VSE Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, VSE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Redwire Corp and VSE

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

The idea behind Redwire Corp and VSE Corporation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.