Correlation Between Moelis and Redwood Trust
Can any of the company-specific risk be diversified away by investing in both Moelis 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 Moelis and Redwood Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moelis Co and Redwood Trust, you can compare the effects of market volatilities on Moelis 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 Moelis with a short position of Redwood Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moelis and Redwood Trust.
Diversification Opportunities for Moelis and Redwood Trust
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Moelis and Redwood is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and Redwood Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Trust and Moelis 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 Moelis Co 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 Moelis i.e., Moelis and Redwood Trust go up and down completely randomly.
Pair Corralation between Moelis and Redwood Trust
Allowing for the 90-day total investment horizon Moelis Co is expected to under-perform the Redwood Trust. In addition to that, Moelis is 1.54 times more volatile than Redwood Trust. It trades about -0.19 of its total potential returns per unit of risk. Redwood Trust is currently generating about 0.08 per unit of volatility. If you would invest 615.00 in Redwood Trust on December 11, 2024 and sell it today you would earn a total of 26.00 from holding Redwood Trust or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moelis Co vs. Redwood Trust
Performance |
| Timeline |
| Moelis |
| Redwood Trust |
Moelis and Redwood Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moelis and Redwood Trust
The main advantage of trading using opposite Moelis and Redwood Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moelis 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.| Moelis vs. PJT Partners | ||
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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