Correlation Between Red Light and Amexdrug

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

By analyzing existing cross correlation between Red Light Holland and Amexdrug, you can compare the effects of market volatilities on Red Light and Amexdrug 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 Light with a short position of Amexdrug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Light and Amexdrug.

Diversification Opportunities for Red Light and Amexdrug

0.0

Correlation Coefficient

Red Light  Amexdrug

Pay attention - limited upside

The 3 months correlation between Red and Amexdrug is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Red Light Holland and Amexdrug in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amexdrug and Red Light 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 Light Holland are associated (or correlated) with Amexdrug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amexdrug has no effect on the direction of Red Light i.e., Red Light and Amexdrug go up and down completely randomly.

Pair Corralation between Red Light and Amexdrug

If you would invest  2.70  in Red Light Holland on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Red Light Holland or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Red Light Holland  vs.  Amexdrug

Red Light Holland

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Light Holland are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Red Light reported solid returns over the last few months and may actually be approaching a breakup point.

Amexdrug

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amexdrug has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Amexdrug is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Red Light and Amexdrug

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

The idea behind Red Light Holland and Amexdrug 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.