Correlation Between Red Cat and Zebra Technologies

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

Diversification Opportunities for Red Cat and Zebra Technologies

0.76

Correlation Coefficient

Red Cat  Zebra Technologies

Poor diversification

The 3 months correlation between Red and Zebra is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Red Cat Holdings and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies 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 Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of Red Cat i.e., Red Cat and Zebra Technologies go up and down completely randomly.

Pair Corralation between Red Cat and Zebra Technologies

Given the investment horizon of 90 days Red Cat Holdings is expected to generate 6.61 times more return on investment than Zebra Technologies. However, Red Cat is 6.61 times more volatile than Zebra Technologies. It trades about 0.21 of its potential returns per unit of risk. Zebra Technologies is currently generating about 0.18 per unit of risk. If you would invest  294.00  in Red Cat Holdings on September 16, 2024 and sell it today you would earn a total of  529.00  from holding Red Cat Holdings or generate 179.93% return on investment over 90 days.

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

Red Cat Holdings  vs.  Zebra Technologies

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.

Zebra Technologies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zebra Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Cat and Zebra Technologies

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

The idea behind Red Cat Holdings and Zebra Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.