Correlation Between REDFLEX HOLDINGS and Premium Nickel

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

Diversification Opportunities for REDFLEX HOLDINGS and Premium Nickel

0.52

Correlation Coefficient

REDFLEX HOLDINGS  Premium Nickel

Very weak diversification

The 3 months correlation between REDFLEX and Premium is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and Premium Nickel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Nickel Resources 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 Premium Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Nickel Resources has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and Premium Nickel go up and down completely randomly.

Pair Corralation between REDFLEX HOLDINGS and Premium Nickel

Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 4.0 times more return on investment than Premium Nickel. However, REDFLEX HOLDINGS is 4.0 times more volatile than Premium Nickel Resources. It trades about 0.06 of its potential returns per unit of risk. Premium Nickel Resources is currently generating about 0.02 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

REDFLEX HOLDINGS LTD  vs.  Premium Nickel Resources

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.

Premium Nickel Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Nickel Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Premium Nickel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with REDFLEX HOLDINGS and Premium Nickel

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

The idea behind REDFLEX HOLDINGS LTD and Premium Nickel Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.