Correlation Between Digital Brands and Red Cat

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

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

Diversification Opportunities for Digital Brands and Red Cat

0.0

Correlation Coefficient

Digital Brands  Red Cat

Pay attention - limited upside

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

Pair Corralation between Digital Brands and Red Cat

If you would invest  665.00  in Red Cat Holdings on May 14, 2025 and sell it today you would earn a total of  242.50  from holding Red Cat Holdings or generate 36.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Digital Brands Group  vs.  Red Cat Holdings

Digital Brands Group

Risk-Adjusted Performance

Weakest

Over the last 90 days Digital Brands Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Digital Brands is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Red Cat Holdings

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Red Cat Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Red Cat unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Brands and Red Cat

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

The idea behind Digital Brands Group and Red Cat Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.