Correlation Between American High-income and Redwood Managed
Can any of the company-specific risk be diversified away by investing in both American High-income and Redwood Managed 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 American High-income and Redwood Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Redwood Managed Municipal, you can compare the effects of market volatilities on American High-income and Redwood Managed 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 American High-income with a short position of Redwood Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Redwood Managed.
Diversification Opportunities for American High-income and Redwood Managed
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Redwood is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Redwood Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Municipal and American High-income 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 American High Income Municipal are associated (or correlated) with Redwood Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Managed Municipal has no effect on the direction of American High-income i.e., American High-income and Redwood Managed go up and down completely randomly.
Pair Corralation between American High-income and Redwood Managed
Assuming the 90 days horizon American High Income Municipal is expected to generate 1.29 times more return on investment than Redwood Managed. However, American High-income is 1.29 times more volatile than Redwood Managed Municipal. It trades about 0.18 of its potential returns per unit of risk. Redwood Managed Municipal is currently generating about 0.1 per unit of risk. If you would invest 1,475 in American High Income Municipal on September 1, 2024 and sell it today you would earn a total of 82.00 from holding American High Income Municipal or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Redwood Managed Municipal
Performance |
| Timeline |
| American High Income |
| Redwood Managed Municipal |
American High-income and Redwood Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Redwood Managed
The main advantage of trading using opposite American High-income and Redwood Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Redwood Managed 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 Managed will offset losses from the drop in Redwood Managed's long position.| American High-income vs. Touchstone Small Cap | American High-income vs. Fisher Small Cap | American High-income vs. Jpmorgan Small Cap | American High-income vs. Legg Mason Partners |
| Redwood Managed vs. Redwood Alphafactor Tactical | Redwood Managed vs. Redwood Systematic Macro | Redwood Managed vs. Neuberger Berman Genesis | Redwood Managed vs. Calamos Strategic Total |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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