Correlation Between Redwood Real and Guggenheim Risk

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

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

Diversification Opportunities for Redwood Real and Guggenheim Risk

-0.3

Correlation Coefficient

Redwood Real  Guggenheim Risk

Very good diversification

The 3 months correlation between Redwood and Guggenheim is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Guggenheim Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Risk Managed and Redwood Real 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 Real Estate are associated (or correlated) with Guggenheim Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Risk Managed has no effect on the direction of Redwood Real i.e., Redwood Real and Guggenheim Risk go up and down completely randomly.

Pair Corralation between Redwood Real and Guggenheim Risk

Assuming the 90 days horizon Redwood Real is expected to generate 1.24 times less return on investment than Guggenheim Risk. But when comparing it to its historical volatility, Redwood Real Estate is 23.36 times less risky than Guggenheim Risk. It trades about 0.57 of its potential returns per unit of risk. Guggenheim Risk Managed is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,816  in Guggenheim Risk Managed on September 28, 2024 and sell it today you would earn a total of  386.00  from holding Guggenheim Risk Managed or generate 13.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.97%
Values	Daily Returns

Redwood Real Estate  vs.  Guggenheim Risk Managed

Redwood Real Estate

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 14 (%) 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.

Guggenheim Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guggenheim Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Redwood Real and Guggenheim Risk

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

The idea behind Redwood Real Estate and Guggenheim Risk Managed 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..