Correlation Between Revolution Beauty and Various Eateries

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

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

Diversification Opportunities for Revolution Beauty and Various Eateries

0.23

Correlation Coefficient

Revolution Beauty  Various Eateries

Modest diversification

The 3 months correlation between Revolution and Various is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Various Eateries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Various Eateries PLC and Revolution Beauty 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 Revolution Beauty Group are associated (or correlated) with Various Eateries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Various Eateries PLC has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Various Eateries go up and down completely randomly.

Pair Corralation between Revolution Beauty and Various Eateries

Assuming the 90 days trading horizon Revolution Beauty Group is expected to under-perform the Various Eateries. In addition to that, Revolution Beauty is 7.75 times more volatile than Various Eateries PLC. It trades about -0.12 of its total potential returns per unit of risk. Various Eateries PLC is currently generating about -0.18 per unit of volatility. If you would invest  1,800  in Various Eateries PLC on September 25, 2024 and sell it today you would lose (100.00) from holding Various Eateries PLC or give up 5.56% of portfolio value over 90 days.

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

Revolution Beauty Group  vs.  Various Eateries PLC

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.

Various Eateries PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Various Eateries PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Various Eateries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Revolution Beauty and Various Eateries

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

The idea behind Revolution Beauty Group and Various Eateries PLC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.