Correlation Between Redwood Trust and SiriusPoint

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

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

Diversification Opportunities for Redwood Trust and SiriusPoint

0.02

Correlation Coefficient

Redwood Trust  SiriusPoint

Significant diversification

The 3 months correlation between Redwood and SiriusPoint is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Trust and SiriusPoint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SiriusPoint and Redwood Trust 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 Trust are associated (or correlated) with SiriusPoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SiriusPoint has no effect on the direction of Redwood Trust i.e., Redwood Trust and SiriusPoint go up and down completely randomly.

Pair Corralation between Redwood Trust and SiriusPoint

Assuming the 90 days trading horizon Redwood Trust is expected to generate 1.87 times more return on investment than SiriusPoint. However, Redwood Trust is 1.87 times more volatile than SiriusPoint. It trades about 0.16 of its potential returns per unit of risk. SiriusPoint is currently generating about 0.03 per unit of risk. If you would invest  2,504  in Redwood Trust on October 4, 2024 and sell it today you would earn a total of  61.00  from holding Redwood Trust or generate 2.44% return on investment over 90 days.

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

Redwood Trust  vs.  SiriusPoint

Redwood Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Redwood Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SiriusPoint

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SiriusPoint are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, SiriusPoint is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Redwood Trust and SiriusPoint

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

The idea behind Redwood Trust and SiriusPoint 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.