Correlation Between RH and Tradeweb Markets

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

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

Diversification Opportunities for RH and Tradeweb Markets

0.34

Correlation Coefficient

RH  Tradeweb Markets

Weak diversification

The 3 months correlation between RH and Tradeweb is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding RH and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets and RH 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 RH are associated (or correlated) with Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of RH i.e., RH and Tradeweb Markets go up and down completely randomly.

Pair Corralation between RH and Tradeweb Markets

Allowing for the 90-day total investment horizon RH is expected to generate 1.16 times less return on investment than Tradeweb Markets. In addition to that, RH is 2.4 times more volatile than Tradeweb Markets. It trades about 0.03 of its total potential returns per unit of risk. Tradeweb Markets is currently generating about 0.1 per unit of volatility. If you would invest  7,151  in Tradeweb Markets on October 10, 2024 and sell it today you would earn a total of  6,108  from holding Tradeweb Markets or generate 85.41% return on investment over 90 days.

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

RH  vs.  Tradeweb Markets

RH

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tradeweb Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradeweb Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tradeweb Markets is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with RH and Tradeweb Markets

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

The idea behind RH and Tradeweb Markets 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.