Correlation Between Amg River and Redwood Managed

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Can any of the company-specific risk be diversified away by investing in both Amg River 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 Amg River and Redwood Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amg River Road and Redwood Managed Municipal, you can compare the effects of market volatilities on Amg River 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 Amg River with a short position of Redwood Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg River and Redwood Managed.

Diversification Opportunities for Amg River and Redwood Managed

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Amg and Redwood is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road 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 Amg River 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 Amg River Road 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 Amg River i.e., Amg River and Redwood Managed go up and down completely randomly.

Pair Corralation between Amg River and Redwood Managed

Assuming the 90 days horizon Amg River Road is expected to generate 11.61 times more return on investment than Redwood Managed. However, Amg River is 11.61 times more volatile than Redwood Managed Municipal. It trades about 0.04 of its potential returns per unit of risk. Redwood Managed Municipal is currently generating about 0.12 per unit of risk. If you would invest  1,090  in Amg River Road on September 13, 2024 and sell it today you would earn a total of  5.00  from holding Amg River Road or generate 0.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amg River Road  vs.  Redwood Managed Municipal

 Performance 
       Timeline  
Amg River Road 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Amg River Road are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Amg River may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Redwood Managed Municipal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Redwood Managed Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Redwood Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amg River and Redwood Managed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amg River and Redwood Managed

The main advantage of trading using opposite Amg River and Redwood Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amg River 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.
The idea behind Amg River Road and Redwood Managed Municipal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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