Correlation Between Redwood Systematic and Lazard Enhanced
Can any of the company-specific risk be diversified away by investing in both Redwood Systematic and Lazard Enhanced 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 Systematic and Lazard Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Systematic Macro and Lazard Enhanced Opportunities, you can compare the effects of market volatilities on Redwood Systematic and Lazard Enhanced 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 Systematic with a short position of Lazard Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Systematic and Lazard Enhanced.
Diversification Opportunities for Redwood Systematic and Lazard Enhanced
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Redwood and Lazard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Systematic Macro and Lazard Enhanced Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Enhanced Oppo and Redwood Systematic 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 Systematic Macro are associated (or correlated) with Lazard Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Enhanced Oppo has no effect on the direction of Redwood Systematic i.e., Redwood Systematic and Lazard Enhanced go up and down completely randomly.
Pair Corralation between Redwood Systematic and Lazard Enhanced
Assuming the 90 days horizon Redwood Systematic Macro is expected to generate 10.77 times more return on investment than Lazard Enhanced. However, Redwood Systematic is 10.77 times more volatile than Lazard Enhanced Opportunities. It trades about 0.25 of its potential returns per unit of risk. Lazard Enhanced Opportunities is currently generating about 0.44 per unit of risk. If you would invest 1,884 in Redwood Systematic Macro on August 31, 2024 and sell it today you would earn a total of 94.00 from holding Redwood Systematic Macro or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Systematic Macro vs. Lazard Enhanced Opportunities
Performance |
| Timeline |
| Redwood Systematic Macro |
| Lazard Enhanced Oppo |
Redwood Systematic and Lazard Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Systematic and Lazard Enhanced
The main advantage of trading using opposite Redwood Systematic and Lazard Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Systematic position performs unexpectedly, Lazard Enhanced 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 Lazard Enhanced will offset losses from the drop in Lazard Enhanced's long position.The idea behind Redwood Systematic Macro and Lazard Enhanced Opportunities 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.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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