Correlation Between Redwood Real and Blackrock Advantage

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

By analyzing existing cross correlation between Redwood Real Estate and Blackrock Advantage Total, you can compare the effects of market volatilities on Redwood Real and Blackrock Advantage 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 Real with a short position of Blackrock Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Blackrock Advantage.

Diversification Opportunities for Redwood Real and Blackrock Advantage

0.76

Correlation Coefficient

Redwood Real  Blackrock Advantage

Poor diversification

The 3 months correlation between Redwood and Blackrock is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Blackrock Advantage Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Advantage Total and Redwood Real 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 Real Estate are associated (or correlated) with Blackrock Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Advantage Total has no effect on the direction of Redwood Real i.e., Redwood Real and Blackrock Advantage go up and down completely randomly.

Pair Corralation between Redwood Real and Blackrock Advantage

Assuming the 90 days horizon Redwood Real Estate is expected to under-perform the Blackrock Advantage. But the mutual fund apears to be less risky and, when comparing its historical volatility, Redwood Real Estate is 5.7 times less risky than Blackrock Advantage. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Blackrock Advantage Total is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,077  in Blackrock Advantage Total on September 15, 2024 and sell it today you would earn a total of  17.00  from holding Blackrock Advantage Total or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Redwood Real Estate  vs.  Blackrock Advantage Total

Redwood Real Estate

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Redwood Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Advantage Total

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Advantage Total are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Advantage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Redwood Real and Blackrock Advantage

The main advantage of trading using opposite Redwood Real and Blackrock Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Real position performs unexpectedly, Blackrock Advantage 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 Blackrock Advantage will offset losses from the drop in Blackrock Advantage's long position.

The idea behind Redwood Real Estate and Blackrock Advantage Total 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.