Correlation Between Redwood Real and Nationwide
Can any of the company-specific risk be diversified away by investing in both Redwood Real and Nationwide 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 Redwood Real and Nationwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Real Estate and Nationwide Sp 500, you can compare the effects of market volatilities on Redwood Real and Nationwide 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 Redwood Real with a short position of Nationwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Nationwide.
Diversification Opportunities for Redwood Real and Nationwide
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Redwood and Nationwide is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Nationwide Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Sp 500 and Redwood Real 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 Redwood Real Estate are associated (or correlated) with Nationwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Sp 500 has no effect on the direction of Redwood Real i.e., Redwood Real and Nationwide go up and down completely randomly.
Pair Corralation between Redwood Real and Nationwide
Assuming the 90 days horizon Redwood Real is expected to generate 3.33 times less return on investment than Nationwide. But when comparing it to its historical volatility, Redwood Real Estate is 17.16 times less risky than Nationwide. It trades about 0.58 of its potential returns per unit of risk. Nationwide Sp 500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,128 in Nationwide Sp 500 on September 12, 2024 and sell it today you would earn a total of 735.00 from holding Nationwide Sp 500 or generate 34.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Real Estate vs. Nationwide Sp 500
Performance |
| Timeline |
| Redwood Real Estate |
| Nationwide Sp 500 |
Redwood Real and Nationwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Real and Nationwide
The main advantage of trading using opposite Redwood Real and Nationwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Real position performs unexpectedly, Nationwide 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 Nationwide will offset losses from the drop in Nationwide's long position.| Redwood Real vs. Vanguard Total Stock | Redwood Real vs. Vanguard 500 Index | Redwood Real vs. Vanguard Total Stock | Redwood Real vs. Vanguard Total Stock |
| Nationwide vs. Jhancock Real Estate | Nationwide vs. Guggenheim Risk Managed | Nationwide vs. Redwood Real Estate | Nationwide vs. Prudential Real Estate |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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