Correlation Between Redwood Real and Ladenburg Growth

Can any of the company-specific risk be diversified away by investing in both Redwood Real and Ladenburg Growth 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 Ladenburg Growth 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 Ladenburg Growth Income, you can compare the effects of market volatilities on Redwood Real and Ladenburg Growth 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 Ladenburg Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Ladenburg Growth.

Diversification Opportunities for Redwood Real and Ladenburg Growth

0.6

Correlation Coefficient

Redwood Real  Ladenburg Growth

Poor diversification

The 3 months correlation between Redwood and Ladenburg is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Ladenburg Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladenburg Growth Income 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 Ladenburg Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladenburg Growth Income has no effect on the direction of Redwood Real i.e., Redwood Real and Ladenburg Growth go up and down completely randomly.

Pair Corralation between Redwood Real and Ladenburg Growth

Assuming the 90 days horizon Redwood Real is expected to generate 2.27 times less return on investment than Ladenburg Growth. But when comparing it to its historical volatility, Redwood Real Estate is 12.72 times less risky than Ladenburg Growth. It trades about 0.57 of its potential returns per unit of risk. Ladenburg Growth Income is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Ladenburg Growth Income on September 18, 2024 and sell it today you would earn a total of  376.00  from holding Ladenburg Growth Income or generate 31.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.4%
Values	Daily Returns

Redwood Real Estate  vs.  Ladenburg Growth Income

Redwood Real Estate

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Real Estate are ranked lower than 15 (%) 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.

Ladenburg Growth Income

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Redwood Real and Ladenburg Growth

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

The idea behind Redwood Real Estate and Ladenburg Growth Income 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.