Correlation Between Ford and Redwood Systematic
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Redwood Systematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Redwood Systematic Macro, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Redwood Systematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Redwood Systematic.
Diversification Opportunities for Ford and Redwood Systematic
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Redwood is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Redwood Systematic go up and down completely randomly.
Pair Corralation between Ford and Redwood Systematic
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.49 times more return on investment than Redwood Systematic. However, Ford is 2.49 times more volatile than Redwood Systematic Macro. It trades about 0.13 of its potential returns per unit of risk. Redwood Systematic Macro is currently generating about 0.14 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Redwood Systematic Macro
Performance |
| Timeline |
| Ford Motor |
| Redwood Systematic Macro |
Ford and Redwood Systematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Redwood Systematic
The main advantage of trading using opposite Ford and Redwood Systematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Redwood Systematic Macro 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.| Redwood Systematic vs. Us Government Securities | Redwood Systematic vs. Ridgeworth Seix Government | Redwood Systematic vs. Lord Abbett Government | Redwood Systematic vs. Davis Government Bond |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |