Correlation Between Vodafone Group and Revolution Beauty

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

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

Diversification Opportunities for Vodafone Group and Revolution Beauty

0.77

Correlation Coefficient

Vodafone Group  Revolution Beauty

Poor diversification

The 3 months correlation between Vodafone and Revolution is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group 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 Vodafone Group 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 Vodafone Group 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 Vodafone Group i.e., Vodafone Group and Revolution Beauty go up and down completely randomly.

Pair Corralation between Vodafone Group and Revolution Beauty

Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the Revolution Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Vodafone Group PLC is 2.32 times less risky than Revolution Beauty. The stock trades about -0.02 of its potential returns per unit of risk. The Revolution Beauty Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Revolution Beauty Group on September 20, 2024 and sell it today you would lose (409.00) from holding Revolution Beauty Group or give up 21.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Vodafone Group PLC  vs.  Revolution Beauty Group

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Vodafone Group and Revolution Beauty

The main advantage of trading using opposite Vodafone Group and Revolution Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.