Correlation Between Anglo American and Revolution Beauty

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

By analyzing existing cross correlation between Anglo American PLC and Revolution Beauty Group, you can compare the effects of market volatilities on Anglo American and Revolution Beauty 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 Anglo American with a short position of Revolution Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Revolution Beauty.

Diversification Opportunities for Anglo American and Revolution Beauty

-0.48

Correlation Coefficient

Anglo American  Revolution Beauty

Very good diversification

The 3 months correlation between Anglo and Revolution is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty and Anglo American 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 Anglo American PLC are associated (or correlated) with Revolution Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Beauty has no effect on the direction of Anglo American i.e., Anglo American and Revolution Beauty go up and down completely randomly.

Pair Corralation between Anglo American and Revolution Beauty

Assuming the 90 days trading horizon Anglo American PLC is expected to generate 0.61 times more return on investment than Revolution Beauty. However, Anglo American PLC is 1.63 times less risky than Revolution Beauty. It trades about 0.08 of its potential returns per unit of risk. Revolution Beauty Group is currently generating about -0.1 per unit of risk. If you would invest  220,100  in Anglo American PLC on September 19, 2024 and sell it today you would earn a total of  22,900  from holding Anglo American PLC or generate 10.4% return on investment over 90 days.

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

Anglo American PLC  vs.  Revolution Beauty Group

Anglo American PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Revolution Beauty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Revolution Beauty Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Anglo American and Revolution Beauty

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

The idea behind Anglo American PLC and Revolution Beauty Group 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.