Correlation Between LendingClub Corp and Redwood Trust
Can any of the company-specific risk be diversified away by investing in both LendingClub Corp and Redwood Trust 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 LendingClub Corp and Redwood Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LendingClub Corp and Redwood Trust, you can compare the effects of market volatilities on LendingClub Corp and Redwood Trust 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 LendingClub Corp with a short position of Redwood Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of LendingClub Corp and Redwood Trust.
Diversification Opportunities for LendingClub Corp and Redwood Trust
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LendingClub and Redwood is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Redwood Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Trust and LendingClub Corp 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 LendingClub Corp are associated (or correlated) with Redwood Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Trust has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Redwood Trust go up and down completely randomly.
Pair Corralation between LendingClub Corp and Redwood Trust
Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 2.95 times more return on investment than Redwood Trust. However, LendingClub Corp is 2.95 times more volatile than Redwood Trust. It trades about 0.25 of its potential returns per unit of risk. Redwood Trust is currently generating about -0.06 per unit of risk. If you would invest 1,421 in LendingClub Corp on September 2, 2024 and sell it today you would earn a total of 243.00 from holding LendingClub Corp or generate 17.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LendingClub Corp vs. Redwood Trust
Performance |
| Timeline |
| LendingClub Corp |
| Redwood Trust |
LendingClub Corp and Redwood Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LendingClub Corp and Redwood Trust
The main advantage of trading using opposite LendingClub Corp and Redwood Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LendingClub Corp position performs unexpectedly, Redwood Trust 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 Trust will offset losses from the drop in Redwood Trust's long position.| LendingClub Corp vs. Navient Corp | LendingClub Corp vs. Green Dot | LendingClub Corp vs. Orix Corp Ads | LendingClub Corp vs. FirstCash |
| Redwood Trust vs. Two Harbors Investments | Redwood Trust vs. AG Mortgage Investment | Redwood Trust vs. Invesco Mortgage Capital | Redwood Trust vs. MFA Financial |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |