Correlation Between Tradeweb Markets and RH

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

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

Diversification Opportunities for Tradeweb Markets and RH

0.34

Correlation Coefficient

Tradeweb Markets  RH

Weak diversification

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

Pair Corralation between Tradeweb Markets and RH

Allowing for the 90-day total investment horizon Tradeweb Markets is expected to generate 0.42 times more return on investment than RH. However, Tradeweb Markets is 2.4 times less risky than RH. It trades about 0.1 of its potential returns per unit of risk. RH is currently generating about 0.03 per unit of risk. 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

Tradeweb Markets  vs.  RH

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.

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.

Pair Trading with Tradeweb Markets and RH

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

The idea behind Tradeweb Markets and RH 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.