Correlation Between REDFLEX HOLDINGS and Elcora Advanced

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

Diversification Opportunities for REDFLEX HOLDINGS and Elcora Advanced

-0.06

Correlation Coefficient

REDFLEX HOLDINGS  Elcora Advanced

Good diversification

The 3 months correlation between REDFLEX and Elcora is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Elcora Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcora Advanced Materials 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 Elcora Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcora Advanced Materials has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Elcora Advanced go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Elcora Advanced

Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 1.93 times more return on investment than Elcora Advanced. However, REDFLEX HOLDINGS is 1.93 times more volatile than Elcora Advanced Materials. It trades about 0.06 of its potential returns per unit of risk. Elcora Advanced Materials is currently generating about 0.06 per unit of risk. If you would invest  3.29  in REDFLEX HOLDINGS LTD on September 15, 2024 and sell it today you would lose (1.24) from holding REDFLEX HOLDINGS LTD or give up 37.69% of portfolio value over 90 days.

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

REDFLEX HOLDINGS LTD  vs.  Elcora Advanced Materials

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.

Elcora Advanced Materials

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with REDFLEX HOLDINGS and Elcora Advanced

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

The idea behind REDFLEX HOLDINGS LTD and Elcora Advanced Materials 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.