Correlation Between Jhancock Real and Redwood Real

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

Diversification Opportunities for Jhancock Real and Redwood Real

-0.46

Correlation Coefficient

Jhancock Real  Redwood Real

Very good diversification

The 3 months correlation between Jhancock and Redwood is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Jhancock Real Estate 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 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 Jhancock Real Estate 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 Real i.e., Jhancock Real and Redwood Real go up and down completely randomly.

Pair Corralation between Jhancock Real and Redwood Real

Assuming the 90 days horizon Jhancock Real Estate is expected to generate 4.0 times more return on investment than Redwood Real. However, Jhancock Real is 4.0 times more volatile than Redwood Real Estate. It trades about 0.28 of its potential returns per unit of risk. Redwood Real Estate is currently generating about -0.03 per unit of risk. If you would invest  1,235  in Jhancock Real Estate on December 4, 2024 and sell it today you would earn a total of  42.00  from holding Jhancock Real Estate or generate 3.4% return on investment over 90 days.

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

Jhancock Real Estate  vs.  Redwood Real Estate

Jhancock Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jhancock Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Jhancock Real 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 16 (%) 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 Real and Redwood Real

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

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.