Correlation Between Sequoia Financial and Red Hill

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

By analyzing existing cross correlation between Sequoia Financial Group and Red Hill Iron, you can compare the effects of market volatilities on Sequoia Financial and Red Hill 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 Sequoia Financial with a short position of Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sequoia Financial and Red Hill.

Diversification Opportunities for Sequoia Financial and Red Hill

0.39

Correlation Coefficient

Sequoia Financial  Red Hill

Weak diversification

The 3 months correlation between Sequoia and Red is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sequoia Financial Group and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron and Sequoia Financial 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 Sequoia Financial Group are associated (or correlated) with Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Sequoia Financial i.e., Sequoia Financial and Red Hill go up and down completely randomly.

Pair Corralation between Sequoia Financial and Red Hill

Assuming the 90 days trading horizon Sequoia Financial Group is expected to generate 1.25 times more return on investment than Red Hill. However, Sequoia Financial is 1.25 times more volatile than Red Hill Iron. It trades about 0.08 of its potential returns per unit of risk. Red Hill Iron is currently generating about 0.09 per unit of risk. If you would invest  37.00  in Sequoia Financial Group on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Sequoia Financial Group or generate 10.81% return on investment over 90 days.

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

Sequoia Financial Group  vs.  Red Hill Iron

Sequoia Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sequoia Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sequoia Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Red Hill Iron

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sequoia Financial and Red Hill

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

The idea behind Sequoia Financial Group and Red Hill Iron 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.