Correlation Between Blackrock and Redwood Managed

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

By analyzing existing cross correlation between Blackrock Sp 500 and Redwood Managed Municipal, you can compare the effects of market volatilities on Blackrock and Redwood Managed 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 Blackrock with a short position of Redwood Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock and Redwood Managed.

Diversification Opportunities for Blackrock and Redwood Managed

-0.65

Correlation Coefficient

Blackrock  Redwood Managed

Excellent diversification

The 3 months correlation between Blackrock and Redwood is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Sp 500 and Redwood Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Managed Municipal and Blackrock 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 Blackrock Sp 500 are associated (or correlated) with Redwood Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Managed Municipal has no effect on the direction of Blackrock i.e., Blackrock and Redwood Managed go up and down completely randomly.

Pair Corralation between Blackrock and Redwood Managed

Assuming the 90 days horizon Blackrock Sp 500 is expected to generate 7.08 times more return on investment than Redwood Managed. However, Blackrock is 7.08 times more volatile than Redwood Managed Municipal. It trades about 0.2 of its potential returns per unit of risk. Redwood Managed Municipal is currently generating about -0.03 per unit of risk. If you would invest  64,683  in Blackrock Sp 500 on September 2, 2024 and sell it today you would earn a total of  6,053  from holding Blackrock Sp 500 or generate 9.36% return on investment over 90 days.

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

Blackrock Sp 500  vs.  Redwood Managed Municipal

Blackrock Sp 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Sp 500 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Redwood Managed Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redwood Managed Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Redwood Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock and Redwood Managed

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

The idea behind Blackrock Sp 500 and Redwood Managed Municipal 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 Transaction History module to view history of all your transactions and understand their impact on performance.