Correlation Between LeaderSharesTM AlphaFactor and Redwood Systematic

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

By analyzing existing cross correlation between LeaderSharesTM AlphaFactor Core and Redwood Systematic Macro, you can compare the effects of market volatilities on LeaderSharesTM AlphaFactor and Redwood Systematic 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 LeaderSharesTM AlphaFactor with a short position of Redwood Systematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of LeaderSharesTM AlphaFactor and Redwood Systematic.

Diversification Opportunities for LeaderSharesTM AlphaFactor and Redwood Systematic

0.74

Correlation Coefficient

LeaderSharesTM AlphaFactor  Redwood Systematic

Poor diversification

The 3 months correlation between LeaderSharesTM and Redwood is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding LeaderSharesTM AlphaFactor Cor and Redwood Systematic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Systematic Macro and LeaderSharesTM AlphaFactor 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 LeaderSharesTM AlphaFactor Core are associated (or correlated) with Redwood Systematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Systematic Macro has no effect on the direction of LeaderSharesTM AlphaFactor i.e., LeaderSharesTM AlphaFactor and Redwood Systematic go up and down completely randomly.

Pair Corralation between LeaderSharesTM AlphaFactor and Redwood Systematic

Given the investment horizon of 90 days LeaderSharesTM AlphaFactor Core is expected to generate 0.63 times more return on investment than Redwood Systematic. However, LeaderSharesTM AlphaFactor Core is 1.59 times less risky than Redwood Systematic. It trades about -0.02 of its potential returns per unit of risk. Redwood Systematic Macro is currently generating about -0.11 per unit of risk. If you would invest  4,165  in LeaderSharesTM AlphaFactor Core on October 11, 2024 and sell it today you would lose (66.00) from holding LeaderSharesTM AlphaFactor Core or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

LeaderSharesTM AlphaFactor Cor  vs.  Redwood Systematic Macro

LeaderSharesTM AlphaFactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LeaderSharesTM AlphaFactor Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LeaderSharesTM AlphaFactor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Redwood Systematic Macro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwood Systematic Macro has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 LeaderSharesTM AlphaFactor and Redwood Systematic

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

The idea behind LeaderSharesTM AlphaFactor Core and Redwood Systematic Macro 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.