Correlation Between Magnite and Redfin Corp

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

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

Diversification Opportunities for Magnite and Redfin Corp

0.57

Correlation Coefficient

Magnite  Redfin Corp

Very weak diversification

The 3 months correlation between Magnite and Redfin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp and Magnite 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 Magnite 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 Magnite i.e., Magnite and Redfin Corp go up and down completely randomly.

Pair Corralation between Magnite and Redfin Corp

Given the investment horizon of 90 days Magnite is expected to generate 1.4 times more return on investment than Redfin Corp. However, Magnite is 1.4 times more volatile than Redfin Corp. It trades about 0.26 of its potential returns per unit of risk. Redfin Corp is currently generating about 0.18 per unit of risk. If you would invest  1,216  in Magnite on May 4, 2025 and sell it today you would earn a total of  1,003  from holding Magnite or generate 82.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.49%
Values	Daily Returns

Magnite  vs.  Redfin Corp

Magnite

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Redfin Corp

Risk-Adjusted Performance

Good

Over the last 90 days Redfin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent technical and fundamental indicators, Redfin Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnite and Redfin Corp

The main advantage of trading using opposite Magnite and Redfin Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite 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 Magnite 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.