Correlation Between Ehang Holdings and Redwire Corp

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

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

Diversification Opportunities for Ehang Holdings and Redwire Corp

0.37

Correlation Coefficient

Ehang Holdings  Redwire Corp

Weak diversification

The 3 months correlation between Ehang and Redwire is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ehang Holdings and Redwire Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwire Corp and Ehang 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 Ehang Holdings 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 Ehang Holdings i.e., Ehang Holdings and Redwire Corp go up and down completely randomly.

Pair Corralation between Ehang Holdings and Redwire Corp

Allowing for the 90-day total investment horizon Ehang Holdings is expected to generate 3.64 times less return on investment than Redwire Corp. In addition to that, Ehang Holdings is 1.43 times more volatile than Redwire Corp. It trades about 0.05 of its total potential returns per unit of risk. Redwire Corp is currently generating about 0.28 per unit of volatility. If you would invest  634.00  in Redwire Corp on August 31, 2024 and sell it today you would earn a total of  715.00  from holding Redwire Corp or generate 112.78% return on investment over 90 days.

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

Ehang Holdings  vs.  Redwire Corp

Ehang Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Redwire Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Redwire Corp are ranked lower than 22 (%) 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 Ehang Holdings and Redwire Corp

The main advantage of trading using opposite Ehang Holdings and Redwire Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ehang Holdings 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 Ehang Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.