Correlation Between Verizon Communications and Redwood Managed

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

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

Diversification Opportunities for Verizon Communications and Redwood Managed

-0.22

Correlation Coefficient

Verizon Communications  Redwood Managed

Very good diversification

The 3 months correlation between Verizon and Redwood is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Redwood Managed go up and down completely randomly.

Pair Corralation between Verizon Communications and Redwood Managed

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Redwood Managed. In addition to that, Verizon Communications is 6.01 times more volatile than Redwood Managed Municipal. It trades about -0.01 of its total potential returns per unit of risk. Redwood Managed Municipal is currently generating about 0.03 per unit of volatility. If you would invest  1,438  in Redwood Managed Municipal on February 16, 2024 and sell it today you would earn a total of  42.00  from holding Redwood Managed Municipal or generate 2.92% return on investment over 90 days.

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

Verizon Communications  vs.  Redwood Managed Municipal

Verizon Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Redwood Managed Municipal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Redwood Managed Municipal are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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 Verizon Communications and Redwood Managed

The main advantage of trading using opposite Verizon Communications and Redwood Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.