Correlation Between REDFLEX HOLDINGS and Canada Carbon

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

By analyzing existing cross correlation between REDFLEX HOLDINGS LTD and Canada Carbon, you can compare the effects of market volatilities on REDFLEX HOLDINGS and Canada Carbon 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 REDFLEX HOLDINGS with a short position of Canada Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDFLEX HOLDINGS and Canada Carbon.

Diversification Opportunities for REDFLEX HOLDINGS and Canada Carbon

0.4

Correlation Coefficient

REDFLEX HOLDINGS  Canada Carbon

Very weak diversification

The 3 months correlation between REDFLEX and Canada is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Canada Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Carbon and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS LTD are associated (or correlated) with Canada Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Carbon has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Canada Carbon go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Canada Carbon

Assuming the 90 days horizon REDFLEX HOLDINGS is expected to generate 13.99 times less return on investment than Canada Carbon. But when comparing it to its historical volatility, REDFLEX HOLDINGS LTD is 5.57 times less risky than Canada Carbon. It trades about 0.06 of its potential returns per unit of risk. Canada Carbon is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.99  in Canada Carbon on September 15, 2024 and sell it today you would earn a total of  0.51  from holding Canada Carbon or generate 51.52% return on investment over 90 days.

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

REDFLEX HOLDINGS LTD  vs.  Canada Carbon

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REDFLEX HOLDINGS LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, REDFLEX HOLDINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Canada Carbon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Carbon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Canada Carbon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REDFLEX HOLDINGS and Canada Carbon

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

The idea behind REDFLEX HOLDINGS LTD and Canada Carbon 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.