Correlation Between VSE and Redwire Corp

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

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

Diversification Opportunities for VSE and Redwire Corp

-0.36

Correlation Coefficient

VSE  Redwire Corp

Very good diversification

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

Pair Corralation between VSE and Redwire Corp

Given the investment horizon of 90 days VSE is expected to generate 6.48 times less return on investment than Redwire Corp. But when comparing it to its historical volatility, VSE Corporation is 7.29 times less risky than Redwire Corp. It trades about 0.23 of its potential returns per unit of risk. Redwire Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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

VSE Corp.  vs.  Redwire Corp

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.

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.

Pair Trading with VSE and Redwire Corp

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

The idea behind VSE Corporation and Redwire Corp 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.