Correlation Between Jhancock Short and Redwood Real

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

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

Diversification Opportunities for Jhancock Short and Redwood Real

0.64

Correlation Coefficient

Jhancock Short  Redwood Real

Poor diversification

The 3 months correlation between Jhancock and Redwood is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Jhancock Short Duration and Redwood Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Real Estate and Jhancock Short 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 Jhancock Short Duration are associated (or correlated) with Redwood Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Real Estate has no effect on the direction of Jhancock Short i.e., Jhancock Short and Redwood Real go up and down completely randomly.

Pair Corralation between Jhancock Short and Redwood Real

Assuming the 90 days horizon Jhancock Short is expected to generate 1.0 times less return on investment than Redwood Real. In addition to that, Jhancock Short is 4.71 times more volatile than Redwood Real Estate. It trades about 0.23 of its total potential returns per unit of risk. Redwood Real Estate is currently generating about 1.08 per unit of volatility. If you would invest  2,472  in Redwood Real Estate on December 23, 2024 and sell it today you would earn a total of  46.00  from holding Redwood Real Estate or generate 1.86% return on investment over 90 days.

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

Jhancock Short Duration  vs.  Redwood Real Estate

Jhancock Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jhancock Short Duration are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Jhancock Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Redwood Real Estate

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 84 (%) 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.

Pair Trading with Jhancock Short and Redwood Real

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

The idea behind Jhancock Short Duration and Redwood Real Estate 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.