Correlation Between REDFLEX HOLDINGS and Skyharbour Resources

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

Diversification Opportunities for REDFLEX HOLDINGS and Skyharbour Resources

-0.44

Correlation Coefficient

REDFLEX HOLDINGS  Skyharbour Resources

Very good diversification

The 3 months correlation between REDFLEX and Skyharbour is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Skyharbour Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyharbour 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 Skyharbour Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyharbour Resources has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Skyharbour Resources go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Skyharbour Resources

Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 3.28 times more return on investment than Skyharbour Resources. However, REDFLEX HOLDINGS is 3.28 times more volatile than Skyharbour Resources. It trades about 0.12 of its potential returns per unit of risk. Skyharbour Resources is currently generating about -0.02 per unit of risk. If you would invest  2.42  in REDFLEX HOLDINGS LTD on December 31, 2024 and sell it today you would earn a total of  1.38  from holding REDFLEX HOLDINGS LTD or generate 57.02% return on investment over 90 days.

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

REDFLEX HOLDINGS LTD  vs.  Skyharbour Resources

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Skyharbour Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skyharbour Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Skyharbour Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with REDFLEX HOLDINGS and Skyharbour Resources

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

The idea behind REDFLEX HOLDINGS LTD and Skyharbour 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.