Correlation Between Thornburg Low and Redwood Real

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

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

Diversification Opportunities for Thornburg Low and Redwood Real

0.73

Correlation Coefficient

Thornburg Low  Redwood Real

Poor diversification

The 3 months correlation between Thornburg and Redwood is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Thornburg Low Duration and Redwood Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Real Estate and Thornburg Low 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 Thornburg Low Duration are associated (or correlated) with Redwood Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Real Estate has no effect on the direction of Thornburg Low i.e., Thornburg Low and Redwood Real go up and down completely randomly.

Pair Corralation between Thornburg Low and Redwood Real

Assuming the 90 days horizon Thornburg Low Duration is not expected to generate positive returns. However, Thornburg Low Duration is 4.28 times less risky than Redwood Real. It waists most of its returns potential to compensate for thr risk taken. Redwood Real is generating about -0.04 per unit of risk. If you would invest  1,222  in Thornburg Low Duration on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Thornburg Low Duration or generate 0.0% return on investment over 90 days.

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

Thornburg Low Duration  vs.  Redwood Real Estate

Thornburg Low Duration

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Low Duration are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Thornburg Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Redwood Real Estate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Redwood Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thornburg Low and Redwood Real

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

The idea behind Thornburg Low Duration and Redwood Real Estate 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.