Correlation Between Redwood Systematic and LeaderSharesTM AlphaFactor

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

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

Diversification Opportunities for Redwood Systematic and LeaderSharesTM AlphaFactor

0.74

Correlation Coefficient

Redwood Systematic  LeaderSharesTM AlphaFactor

Poor diversification

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

Pair Corralation between Redwood Systematic and LeaderSharesTM AlphaFactor

Assuming the 90 days horizon Redwood Systematic Macro is expected to under-perform the LeaderSharesTM AlphaFactor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Redwood Systematic Macro is 1.12 times less risky than LeaderSharesTM AlphaFactor. The mutual fund trades about 0.0 of its potential returns per unit of risk. The LeaderSharesTM AlphaFactor Core is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,087  in LeaderSharesTM AlphaFactor Core on October 11, 2024 and sell it today you would earn a total of  1,012  from holding LeaderSharesTM AlphaFactor Core or generate 32.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Redwood Systematic Macro  vs.  LeaderSharesTM AlphaFactor Cor

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.

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.

Pair Trading with Redwood Systematic and LeaderSharesTM AlphaFactor

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

The idea behind Redwood Systematic Macro and LeaderSharesTM AlphaFactor Core 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.