Correlation Between REDFLEX HOLDINGS and Ridgestone Mining

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

Diversification Opportunities for REDFLEX HOLDINGS and Ridgestone Mining

0.07

Correlation Coefficient

REDFLEX HOLDINGS  Ridgestone Mining

Significant diversification

The 3 months correlation between REDFLEX and Ridgestone is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Ridgestone Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgestone Mining 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 Ridgestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgestone Mining has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Ridgestone Mining go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Ridgestone Mining

Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 2.3 times more return on investment than Ridgestone Mining. However, REDFLEX HOLDINGS is 2.3 times more volatile than Ridgestone Mining. It trades about 0.03 of its potential returns per unit of risk. Ridgestone Mining is currently generating about 0.01 per unit of risk. If you would invest  3.50  in REDFLEX HOLDINGS LTD on September 2, 2024 and sell it today you would lose (0.71) from holding REDFLEX HOLDINGS LTD or give up 20.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

REDFLEX HOLDINGS LTD  vs.  Ridgestone Mining

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Ridgestone Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ridgestone Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Ridgestone Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REDFLEX HOLDINGS and Ridgestone Mining

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

The idea behind REDFLEX HOLDINGS LTD and Ridgestone Mining 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.