Correlation Between Ares Commercial and Redwood Trust
Can any of the company-specific risk be diversified away by investing in both Ares Commercial and Redwood Trust 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 Ares Commercial and Redwood Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Commercial Real and Redwood Trust, you can compare the effects of market volatilities on Ares Commercial and Redwood Trust 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 Ares Commercial with a short position of Redwood Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Redwood Trust.
Diversification Opportunities for Ares Commercial and Redwood Trust
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ares and Redwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real and Redwood Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Trust and Ares Commercial 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 Ares Commercial Real are associated (or correlated) with Redwood Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Trust has no effect on the direction of Ares Commercial i.e., Ares Commercial and Redwood Trust go up and down completely randomly.
Pair Corralation between Ares Commercial and Redwood Trust
Given the investment horizon of 90 days Ares Commercial Real is expected to generate 1.85 times more return on investment than Redwood Trust. However, Ares Commercial is 1.85 times more volatile than Redwood Trust. It trades about 0.23 of its potential returns per unit of risk. Redwood Trust is currently generating about -0.21 per unit of risk. If you would invest 641.00 in Ares Commercial Real on August 30, 2024 and sell it today you would earn a total of 88.00 from holding Ares Commercial Real or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ares Commercial Real vs. Redwood Trust
Performance |
| Timeline |
| Ares Commercial Real |
| Redwood Trust |
Ares Commercial and Redwood Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Commercial and Redwood Trust
The main advantage of trading using opposite Ares Commercial and Redwood Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial position performs unexpectedly, Redwood Trust 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 Redwood Trust will offset losses from the drop in Redwood Trust's long position.| Ares Commercial vs. Two Harbors Investments | Ares Commercial vs. Apollo Commercial Real | Ares Commercial vs. Ellington Financial | Ares Commercial vs. Dynex Capital |
| Redwood Trust vs. Ellington Residential Mortgage | Redwood Trust vs. Ellington Financial | Redwood Trust vs. Ares Commercial Real | Redwood Trust vs. Cherry Hill Mortgage |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |