Correlation Between Capital Income and Redwood Systematic
Can any of the company-specific risk be diversified away by investing in both Capital Income and Redwood Systematic 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 Capital Income and Redwood Systematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Redwood Systematic Macro, you can compare the effects of market volatilities on Capital Income and Redwood Systematic 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 Capital Income with a short position of Redwood Systematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Redwood Systematic.
Diversification Opportunities for Capital Income and Redwood Systematic
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Redwood is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Redwood Systematic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Systematic Macro and Capital 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 Capital Income Builder are associated (or correlated) with Redwood Systematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Systematic Macro has no effect on the direction of Capital Income i.e., Capital Income and Redwood Systematic go up and down completely randomly.
Pair Corralation between Capital Income and Redwood Systematic
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.39 times more return on investment than Redwood Systematic. However, Capital Income Builder is 2.55 times less risky than Redwood Systematic. It trades about 0.24 of its potential returns per unit of risk. Redwood Systematic Macro is currently generating about -0.06 per unit of risk. If you would invest 6,906 in Capital Income Builder on October 24, 2024 and sell it today you would earn a total of 171.00 from holding Capital Income Builder or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Redwood Systematic Macro
Performance |
| Timeline |
| Capital Income Builder |
| Redwood Systematic Macro |
Capital Income and Redwood Systematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Redwood Systematic
The main advantage of trading using opposite Capital Income and Redwood Systematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Redwood Systematic 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 Systematic will offset losses from the drop in Redwood Systematic's long position.| Capital Income vs. Old Westbury Municipal | Capital Income vs. Lord Abbett Intermediate | Capital Income vs. Blackrock Pa Muni | Capital Income vs. Inverse Government Long |
| Redwood Systematic vs. Hartford Healthcare Hls | Redwood Systematic vs. Fidelity Advisor Health | Redwood Systematic vs. Blackrock Health Sciences | Redwood Systematic vs. Eventide Healthcare Life |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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