Correlation Between Red Cat and Guardforce

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

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

Diversification Opportunities for Red Cat and Guardforce

0.48

Correlation Coefficient

Red Cat  Guardforce

Very weak diversification

The 3 months correlation between Red and Guardforce is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Guardforce AI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardforce AI and Red Cat 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 Cat Holdings are associated (or correlated) with Guardforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardforce AI has no effect on the direction of Red Cat i.e., Red Cat and Guardforce go up and down completely randomly.

Pair Corralation between Red Cat and Guardforce

Given the investment horizon of 90 days Red Cat is expected to generate 1.81 times less return on investment than Guardforce. But when comparing it to its historical volatility, Red Cat Holdings is 3.66 times less risky than Guardforce. It trades about 0.29 of its potential returns per unit of risk. Guardforce AI Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Guardforce AI Co on September 30, 2024 and sell it today you would earn a total of  22.00  from holding Guardforce AI Co or generate 129.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.94%
Values	Daily Returns

Red Cat Holdings  vs.  Guardforce AI Co

Red Cat Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Red Cat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Guardforce AI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardforce AI Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Guardforce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and Guardforce

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

The idea behind Red Cat Holdings and Guardforce AI Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.