Correlation Between Redwood Real and Thornburg
Can any of the company-specific risk be diversified away by investing in both Redwood Real and Thornburg 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 Thornburg 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 Thornburg E Growth, you can compare the effects of market volatilities on Redwood Real and Thornburg 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 Thornburg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Thornburg.
Diversification Opportunities for Redwood Real and Thornburg
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Redwood and Thornburg is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Thornburg E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg E Growth 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 Thornburg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg E Growth has no effect on the direction of Redwood Real i.e., Redwood Real and Thornburg go up and down completely randomly.
Pair Corralation between Redwood Real and Thornburg
Assuming the 90 days horizon Redwood Real Estate is expected to under-perform the Thornburg. But the mutual fund apears to be less risky and, when comparing its historical volatility, Redwood Real Estate is 8.52 times less risky than Thornburg. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Thornburg E Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,125 in Thornburg E Growth on September 13, 2024 and sell it today you would earn a total of 88.00 from holding Thornburg E Growth or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Redwood Real Estate vs. Thornburg E Growth
Performance |
| Timeline |
| Redwood Real Estate |
| Thornburg E Growth |
Redwood Real and Thornburg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Real and Thornburg
The main advantage of trading using opposite Redwood Real and Thornburg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Real position performs unexpectedly, Thornburg 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 Thornburg will offset losses from the drop in Thornburg'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 |
| Thornburg vs. Thornburg Value Fund | Thornburg vs. Thornburg Value Fund | Thornburg vs. Thornburg International Value | Thornburg vs. Thornburg International Value |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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