Correlation Between Redwood Systematic and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both Redwood Systematic and Vanguard Growth 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 Vanguard Growth 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 Vanguard Growth Index, you can compare the effects of market volatilities on Redwood Systematic and Vanguard Growth 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 Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Systematic and Vanguard Growth.
Diversification Opportunities for Redwood Systematic and Vanguard Growth
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Redwood and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Systematic Macro and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Redwood Systematic i.e., Redwood Systematic and Vanguard Growth go up and down completely randomly.
Pair Corralation between Redwood Systematic and Vanguard Growth
Assuming the 90 days horizon Redwood Systematic is expected to generate 2.26 times less return on investment than Vanguard Growth. But when comparing it to its historical volatility, Redwood Systematic Macro is 1.39 times less risky than Vanguard Growth. It trades about 0.07 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 15,293 in Vanguard Growth Index on August 25, 2024 and sell it today you would earn a total of 5,496 from holding Vanguard Growth Index or generate 35.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Systematic Macro vs. Vanguard Growth Index
Performance |
| Timeline |
| Redwood Systematic Macro |
| Vanguard Growth Index |
Redwood Systematic and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Systematic and Vanguard Growth
The main advantage of trading using opposite Redwood Systematic and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Systematic position performs unexpectedly, Vanguard Growth 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 Vanguard Growth will offset losses from the drop in Vanguard Growth's long position.| Redwood Systematic vs. T Rowe Price | Redwood Systematic vs. Plan Investment | Redwood Systematic vs. T Rowe Price | Redwood Systematic vs. Institutional Fiduciary Trust |
| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Mid Cap Index | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard 500 Index |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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