Correlation Between Red Light and Lobe Sciences

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

By analyzing existing cross correlation between Red Light Holland and Lobe Sciences, you can compare the effects of market volatilities on Red Light and Lobe Sciences 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 Red Light with a short position of Lobe Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Light and Lobe Sciences.

Diversification Opportunities for Red Light and Lobe Sciences

-0.13

Correlation Coefficient

Red Light  Lobe Sciences

Good diversification

The 3 months correlation between Red and Lobe is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Red Light Holland and Lobe Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lobe Sciences and Red Light 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 Red Light Holland are associated (or correlated) with Lobe Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lobe Sciences has no effect on the direction of Red Light i.e., Red Light and Lobe Sciences go up and down completely randomly.

Pair Corralation between Red Light and Lobe Sciences

Assuming the 90 days horizon Red Light Holland is expected to under-perform the Lobe Sciences. But the otc stock apears to be less risky and, when comparing its historical volatility, Red Light Holland is 46.37 times less risky than Lobe Sciences. The otc stock trades about -0.07 of its potential returns per unit of risk. The Lobe Sciences is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Lobe Sciences on December 4, 2024 and sell it today you would earn a total of  0.10  from holding Lobe Sciences or generate 83.33% return on investment over 90 days.

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

Red Light Holland  vs.  Lobe Sciences

Red Light Holland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Light Holland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lobe Sciences

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lobe Sciences are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Lobe Sciences reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Light and Lobe Sciences

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

The idea behind Red Light Holland and Lobe Sciences 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.