Correlation Between Multi Manager and Redwood Systematic

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

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

Diversification Opportunities for Multi Manager and Redwood Systematic

-0.07

Correlation Coefficient

Multi Manager  Redwood Systematic

Good diversification

The 3 months correlation between Multi and Redwood is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield 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 Multi Manager 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 Multi Manager High Yield 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 Multi Manager i.e., Multi Manager and Redwood Systematic go up and down completely randomly.

Pair Corralation between Multi Manager and Redwood Systematic

Assuming the 90 days horizon Multi Manager High Yield is expected to generate 0.13 times more return on investment than Redwood Systematic. However, Multi Manager High Yield is 7.51 times less risky than Redwood Systematic. It trades about 0.19 of its potential returns per unit of risk. Redwood Systematic Macro is currently generating about -0.06 per unit of risk. If you would invest  833.00  in Multi Manager High Yield on October 25, 2024 and sell it today you would earn a total of  14.00  from holding Multi Manager High Yield or generate 1.68% return on investment over 90 days.

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

Multi Manager High Yield  vs.  Redwood Systematic Macro

Multi Manager High

Risk-Adjusted Performance

15 of 100

Good

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

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 fairly strong forward indicators, Redwood Systematic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multi Manager and Redwood Systematic

The main advantage of trading using opposite Multi Manager and Redwood Systematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Manager 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 Multi Manager High Yield 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.