Correlation Between Hartford Moderate and Redwood Systematic

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

By analyzing existing cross correlation between Hartford Moderate Allocation and Redwood Systematic Macro, you can compare the effects of market volatilities on Hartford Moderate and Redwood Systematic 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 Hartford Moderate with a short position of Redwood Systematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Moderate and Redwood Systematic.

Diversification Opportunities for Hartford Moderate and Redwood Systematic

0.86

Correlation Coefficient

Hartford Moderate  Redwood Systematic

Very poor diversification

The 3 months correlation between HARTFORD and Redwood is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Moderate Allocation and Redwood Systematic Macro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Systematic Macro and Hartford Moderate 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 Hartford Moderate Allocation are associated (or correlated) with Redwood Systematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Systematic Macro has no effect on the direction of Hartford Moderate i.e., Hartford Moderate and Redwood Systematic go up and down completely randomly.

Pair Corralation between Hartford Moderate and Redwood Systematic

Assuming the 90 days horizon Hartford Moderate is expected to generate 3.49 times less return on investment than Redwood Systematic. But when comparing it to its historical volatility, Hartford Moderate Allocation is 1.88 times less risky than Redwood Systematic. It trades about 0.14 of its potential returns per unit of risk. Redwood Systematic Macro is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,921  in Redwood Systematic Macro on August 30, 2024 and sell it today you would earn a total of  98.00  from holding Redwood Systematic Macro or generate 5.1% return on investment over 90 days.

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

Hartford Moderate Allocation  vs.  Redwood Systematic Macro

Hartford Moderate

Risk-Adjusted Performance

5 of 100

Modest

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

Redwood Systematic Macro

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Systematic Macro are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Redwood Systematic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Hartford Moderate and Redwood Systematic

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

The idea behind Hartford Moderate Allocation and Redwood Systematic Macro 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.