Correlation Between Redwood Systematic and Redwood Managed
Can any of the company-specific risk be diversified away by investing in both Redwood Systematic and Redwood Managed 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 Redwood Managed 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 Redwood Managed Volatility, you can compare the effects of market volatilities on Redwood Systematic and Redwood Managed 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 Redwood Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Systematic and Redwood Managed.
Diversification Opportunities for Redwood Systematic and Redwood Managed
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Redwood and Redwood is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Systematic Macro and Redwood Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Vola 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 Redwood Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Managed Vola has no effect on the direction of Redwood Systematic i.e., Redwood Systematic and Redwood Managed go up and down completely randomly.
Pair Corralation between Redwood Systematic and Redwood Managed
Assuming the 90 days horizon Redwood Systematic Macro is expected to generate 2.73 times more return on investment than Redwood Managed. However, Redwood Systematic is 2.73 times more volatile than Redwood Managed Volatility. It trades about 0.05 of its potential returns per unit of risk. Redwood Managed Volatility is currently generating about 0.04 per unit of risk. If you would invest 1,683 in Redwood Systematic Macro on August 30, 2024 and sell it today you would earn a total of 295.00 from holding Redwood Systematic Macro or generate 17.53% 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. Redwood Managed Volatility
Performance |
| Timeline |
| Redwood Systematic Macro |
| Redwood Managed Vola |
Redwood Systematic and Redwood Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Systematic and Redwood Managed
The main advantage of trading using opposite Redwood Systematic and Redwood Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Systematic position performs unexpectedly, Redwood Managed 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 Managed will offset losses from the drop in Redwood Managed's long position.| Redwood Systematic vs. Western Asset Diversified | Redwood Systematic vs. Pioneer Diversified High | Redwood Systematic vs. Adams Diversified Equity | Redwood Systematic vs. Massmutual Premier Diversified |
| Redwood Managed vs. HUMANA INC | Redwood Managed vs. Aquagold International | Redwood Managed vs. Barloworld Ltd ADR | Redwood Managed vs. Morningstar Unconstrained Allocation |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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