Correlation Between Ab All and Redwood Managed

Can any of the company-specific risk be diversified away by investing in both Ab All 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 Ab All and Redwood Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab All Market and Redwood Managed Municipal, you can compare the effects of market volatilities on Ab All 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 Ab All with a short position of Redwood Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab All and Redwood Managed.

Diversification Opportunities for Ab All and Redwood Managed

0.87

Correlation Coefficient

Ab All  Redwood Managed

Very poor diversification

The 3 months correlation between AMTOX and Redwood is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ab All Market and Redwood Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Municipal and Ab All 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 Ab All Market 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 Municipal has no effect on the direction of Ab All i.e., Ab All and Redwood Managed go up and down completely randomly.

Pair Corralation between Ab All and Redwood Managed

Assuming the 90 days horizon Ab All Market is expected to under-perform the Redwood Managed. In addition to that, Ab All is 5.46 times more volatile than Redwood Managed Municipal. It trades about -0.16 of its total potential returns per unit of risk. Redwood Managed Municipal is currently generating about -0.49 per unit of volatility. If you would invest  1,409  in Redwood Managed Municipal on October 11, 2024 and sell it today you would lose (19.00) from holding Redwood Managed Municipal or give up 1.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Ab All Market  vs.  Redwood Managed Municipal

Ab All Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab All Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab All is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Redwood Managed Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwood Managed Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Redwood Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab All and Redwood Managed

The main advantage of trading using opposite Ab All and Redwood Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab All 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.

The idea behind Ab All Market and Redwood Managed Municipal 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.