Correlation Between RedFlow and Zinc8 Energy

Can any of the company-specific risk be diversified away by investing in both RedFlow and Zinc8 Energy 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 RedFlow and Zinc8 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RedFlow Limited and Zinc8 Energy Solutions, you can compare the effects of market volatilities on RedFlow and Zinc8 Energy 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 RedFlow with a short position of Zinc8 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of RedFlow and Zinc8 Energy.

Diversification Opportunities for RedFlow and Zinc8 Energy

0.11

Correlation Coefficient

RedFlow  Zinc8 Energy

Average diversification

The 3 months correlation between RedFlow and Zinc8 is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding RedFlow Limited and Zinc8 Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zinc8 Energy Solutions and RedFlow 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 RedFlow Limited are associated (or correlated) with Zinc8 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zinc8 Energy Solutions has no effect on the direction of RedFlow i.e., RedFlow and Zinc8 Energy go up and down completely randomly.

Pair Corralation between RedFlow and Zinc8 Energy

Assuming the 90 days horizon RedFlow Limited is expected to generate 11.95 times more return on investment than Zinc8 Energy. However, RedFlow is 11.95 times more volatile than Zinc8 Energy Solutions. It trades about 0.12 of its potential returns per unit of risk. Zinc8 Energy Solutions is currently generating about -0.1 per unit of risk. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

RedFlow Limited  vs.  Zinc8 Energy Solutions

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.

Zinc8 Energy Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zinc8 Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with RedFlow and Zinc8 Energy

The main advantage of trading using opposite RedFlow and Zinc8 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RedFlow position performs unexpectedly, Zinc8 Energy 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 Zinc8 Energy will offset losses from the drop in Zinc8 Energy's long position.

The idea behind RedFlow Limited and Zinc8 Energy Solutions 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.