Correlation Between Red Light and Grey Cloak

Can any of the company-specific risk be diversified away by investing in both Red Light and Grey Cloak 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 Grey Cloak 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 Grey Cloak Tech, you can compare the effects of market volatilities on Red Light and Grey Cloak 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 Grey Cloak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Light and Grey Cloak.

Diversification Opportunities for Red Light and Grey Cloak

-0.62

Correlation Coefficient

Red Light  Grey Cloak

Excellent diversification

The 3 months correlation between Red and Grey is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Red Light Holland and Grey Cloak Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grey Cloak Tech 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 Grey Cloak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grey Cloak Tech has no effect on the direction of Red Light i.e., Red Light and Grey Cloak go up and down completely randomly.

Pair Corralation between Red Light and Grey Cloak

Assuming the 90 days horizon Red Light Holland is expected to under-perform the Grey Cloak. But the otc stock apears to be less risky and, when comparing its historical volatility, Red Light Holland is 1.72 times less risky than Grey Cloak. The otc stock trades about -0.01 of its potential returns per unit of risk. The Grey Cloak Tech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Grey Cloak Tech on September 19, 2024 and sell it today you would earn a total of  75.00  from holding Grey Cloak Tech or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Red Light Holland  vs.  Grey Cloak Tech

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.

Grey Cloak Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grey Cloak Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Grey Cloak showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Light and Grey Cloak

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

The idea behind Red Light Holland and Grey Cloak Tech 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.