Correlation Between Redfin Corp and New England

Can any of the company-specific risk be diversified away by investing in both Redfin Corp and New England 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 Redfin Corp and New England into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Redfin Corp and New England Realty, you can compare the effects of market volatilities on Redfin Corp and New England 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 Redfin Corp with a short position of New England. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redfin Corp and New England.

Diversification Opportunities for Redfin Corp and New England

0.18

Correlation Coefficient

Redfin Corp  New England

Average diversification

The 3 months correlation between Redfin and New is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Redfin Corp and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty and Redfin Corp 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 Redfin Corp are associated (or correlated) with New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Redfin Corp i.e., Redfin Corp and New England go up and down completely randomly.

Pair Corralation between Redfin Corp and New England

Given the investment horizon of 90 days Redfin Corp is expected to generate 3.93 times more return on investment than New England. However, Redfin Corp is 3.93 times more volatile than New England Realty. It trades about 0.08 of its potential returns per unit of risk. New England Realty is currently generating about 0.1 per unit of risk. If you would invest  835.00  in Redfin Corp on December 24, 2024 and sell it today you would earn a total of  269.00  from holding Redfin Corp or generate 32.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

Redfin Corp  vs.  New England Realty

Redfin Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Redfin Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Redfin Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

New England Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New England Realty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, New England displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Redfin Corp and New England

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

The idea behind Redfin Corp and New England Realty 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.