Correlation Between Red Cat and D Wave

Can any of the company-specific risk be diversified away by investing in both Red Cat and D Wave 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 D Wave 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 D Wave Quantum, you can compare the effects of market volatilities on Red Cat and D Wave 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 D Wave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Cat and D Wave.

Diversification Opportunities for Red Cat and D Wave

0.83

Correlation Coefficient

Red Cat  D Wave

Very poor diversification

The 3 months correlation between Red and QBTS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and D Wave Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D Wave Quantum 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 D Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D Wave Quantum has no effect on the direction of Red Cat i.e., Red Cat and D Wave go up and down completely randomly.

Pair Corralation between Red Cat and D Wave

Given the investment horizon of 90 days Red Cat Holdings is expected to generate 0.86 times more return on investment than D Wave. However, Red Cat Holdings is 1.17 times less risky than D Wave. It trades about 0.12 of its potential returns per unit of risk. D Wave Quantum is currently generating about 0.06 per unit of risk. If you would invest  107.00  in Red Cat Holdings on September 12, 2024 and sell it today you would earn a total of  663.00  from holding Red Cat Holdings or generate 619.63% return on investment over 90 days.

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

Red Cat Holdings  vs.  D Wave Quantum

Red Cat Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Cat unveiled solid returns over the last few months and may actually be approaching a breakup point.

D Wave Quantum

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in D Wave Quantum are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, D Wave unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and D Wave

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

The idea behind Red Cat Holdings and D Wave Quantum 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .