Correlation Between Lead Real and Redfin Corp

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

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

Diversification Opportunities for Lead Real and Redfin Corp

-0.61

Correlation Coefficient

Lead Real  Redfin Corp

Excellent diversification

The 3 months correlation between Lead and Redfin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lead Real Estate and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp and Lead 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 Lead Real Estate are associated (or correlated) with Redfin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redfin Corp has no effect on the direction of Lead Real i.e., Lead Real and Redfin Corp go up and down completely randomly.

Pair Corralation between Lead Real and Redfin Corp

Considering the 90-day investment horizon Lead Real Estate is expected to generate 1.45 times more return on investment than Redfin Corp. However, Lead Real is 1.45 times more volatile than Redfin Corp. It trades about 0.18 of its potential returns per unit of risk. Redfin Corp is currently generating about -0.04 per unit of risk. If you would invest  151.00  in Lead Real Estate on September 4, 2024 and sell it today you would earn a total of  83.00  from holding Lead Real Estate or generate 54.97% return on investment over 90 days.

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

Lead Real Estate  vs.  Redfin Corp

Lead Real Estate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lead Real Estate are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lead Real exhibited solid returns over the last few months and may actually be approaching a breakup point.

Redfin Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Redfin Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Redfin Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lead Real and Redfin Corp

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

The idea behind Lead Real Estate and Redfin Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.