Correlation Between REDFLEX HOLDINGS and Canstar Resources

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

By analyzing existing cross correlation between REDFLEX HOLDINGS LTD and Canstar Resources, you can compare the effects of market volatilities on REDFLEX HOLDINGS and Canstar Resources 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 REDFLEX HOLDINGS with a short position of Canstar Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDFLEX HOLDINGS and Canstar Resources.

Diversification Opportunities for REDFLEX HOLDINGS and Canstar Resources

0.42

Correlation Coefficient

REDFLEX HOLDINGS  Canstar Resources

Very weak diversification

The 3 months correlation between REDFLEX and Canstar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Canstar Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canstar Resources and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS LTD are associated (or correlated) with Canstar Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canstar Resources has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Canstar Resources go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Canstar Resources

Assuming the 90 days horizon REDFLEX HOLDINGS is expected to generate 1.14 times less return on investment than Canstar Resources. In addition to that, REDFLEX HOLDINGS is 1.32 times more volatile than Canstar Resources. It trades about 0.03 of its total potential returns per unit of risk. Canstar Resources is currently generating about 0.04 per unit of volatility. If you would invest  5.41  in Canstar Resources on October 7, 2024 and sell it today you would lose (2.59) from holding Canstar Resources or give up 47.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.03%
Values	Daily Returns

REDFLEX HOLDINGS LTD  vs.  Canstar Resources

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Canstar Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canstar Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canstar Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REDFLEX HOLDINGS and Canstar Resources

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

The idea behind REDFLEX HOLDINGS LTD and Canstar Resources 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.