Correlation Between Revolution Beauty and Balfour Beatty
Can any of the company-specific risk be diversified away by investing in both Revolution Beauty and Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty plc, you can compare the effects of market volatilities on Revolution Beauty and Balfour Beatty 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 Balfour Beatty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Beauty and Balfour Beatty.
Diversification Opportunities for Revolution Beauty and Balfour Beatty
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Revolution and Balfour is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty 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 Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Balfour Beatty go up and down completely randomly.
Pair Corralation between Revolution Beauty and Balfour Beatty
Assuming the 90 days trading horizon Revolution Beauty Group is expected to generate 3.75 times more return on investment than Balfour Beatty. However, Revolution Beauty is 3.75 times more volatile than Balfour Beatty plc. It trades about 0.12 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.18 per unit of risk. If you would invest 1,385 in Revolution Beauty Group on September 15, 2024 and sell it today you would earn a total of 120.00 from holding Revolution Beauty Group or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Revolution Beauty Group vs. Balfour Beatty plc
Performance |
| Timeline |
| Revolution Beauty |
| Balfour Beatty plc |
Revolution Beauty and Balfour Beatty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Revolution Beauty and Balfour Beatty
The main advantage of trading using opposite Revolution Beauty and Balfour Beatty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolution Beauty position performs unexpectedly, Balfour Beatty 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 Balfour Beatty will offset losses from the drop in Balfour Beatty's long position.| Revolution Beauty vs. Anglo American PLC | Revolution Beauty vs. Vodafone Group PLC | Revolution Beauty vs. Unilever PLC | Revolution Beauty vs. Centrica PLC |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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