Correlation Between Redwood Real and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Redwood Real and Sterling Capital 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 Sterling Capital 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 Sterling Capital Stratton, you can compare the effects of market volatilities on Redwood Real and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Sterling Capital.

Diversification Opportunities for Redwood Real and Sterling Capital

-0.76

Correlation Coefficient

Redwood Real  Sterling Capital

Pay attention - limited upside

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

Pair Corralation between Redwood Real and Sterling Capital

Assuming the 90 days horizon Redwood Real Estate is expected to generate 0.02 times more return on investment than Sterling Capital. However, Redwood Real Estate is 66.09 times less risky than Sterling Capital. It trades about 1.09 of its potential returns per unit of risk. Sterling Capital Stratton is currently generating about -0.08 per unit of risk. If you would invest  2,474  in Redwood Real Estate on October 25, 2024 and sell it today you would earn a total of  44.00  from holding Redwood Real Estate or generate 1.78% return on investment over 90 days.

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

Redwood Real Estate  vs.  Sterling Capital Stratton

Redwood Real Estate

Risk-Adjusted Performance

85 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 85 (%) 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.

Sterling Capital Stratton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Stratton has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Redwood Real and Sterling Capital

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

The idea behind Redwood Real Estate and Sterling Capital Stratton 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.