Correlation Between FuelPositive Corp and RedFlow

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

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

Diversification Opportunities for FuelPositive Corp and RedFlow

0.28

Correlation Coefficient

FuelPositive Corp  RedFlow

Modest diversification

The 3 months correlation between FuelPositive and RedFlow is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding FuelPositive Corp and RedFlow Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedFlow Limited and FuelPositive Corp 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 FuelPositive Corp are associated (or correlated) with RedFlow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedFlow Limited has no effect on the direction of FuelPositive Corp i.e., FuelPositive Corp and RedFlow go up and down completely randomly.

Pair Corralation between FuelPositive Corp and RedFlow

Assuming the 90 days horizon FuelPositive Corp is expected to generate 28.95 times less return on investment than RedFlow. But when comparing it to its historical volatility, FuelPositive Corp is 7.72 times less risky than RedFlow. It trades about 0.03 of its potential returns per unit of risk. RedFlow Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8.97  in RedFlow Limited on September 22, 2024 and sell it today you would lose (8.96) from holding RedFlow Limited or give up 99.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

FuelPositive Corp  vs.  RedFlow Limited

FuelPositive Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FuelPositive Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, FuelPositive Corp reported solid returns over the last few months and may actually be approaching a breakup point.

RedFlow Limited

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with FuelPositive Corp and RedFlow

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

The idea behind FuelPositive Corp and RedFlow Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.