Correlation Between Revolution Beauty and Biome Technologies
Can any of the company-specific risk be diversified away by investing in both Revolution Beauty and Biome Technologies 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 Biome Technologies 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 Biome Technologies Plc, you can compare the effects of market volatilities on Revolution Beauty and Biome Technologies 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 Biome Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Beauty and Biome Technologies.
Diversification Opportunities for Revolution Beauty and Biome Technologies
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Revolution and Biome is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Biome Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biome Technologies 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 Biome Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biome Technologies Plc has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Biome Technologies go up and down completely randomly.
Pair Corralation between Revolution Beauty and Biome Technologies
Assuming the 90 days trading horizon Revolution Beauty Group is expected to generate 3.94 times more return on investment than Biome Technologies. However, Revolution Beauty is 3.94 times more volatile than Biome Technologies Plc. It trades about 0.22 of its potential returns per unit of risk. Biome Technologies Plc is currently generating about -0.42 per unit of risk. If you would invest 1,470 in Revolution Beauty Group on October 12, 2024 and sell it today you would earn a total of 530.00 from holding Revolution Beauty Group or generate 36.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Revolution Beauty Group vs. Biome Technologies Plc
Performance |
| Timeline |
| Revolution Beauty |
| Biome Technologies Plc |
Revolution Beauty and Biome Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Revolution Beauty and Biome Technologies
The main advantage of trading using opposite Revolution Beauty and Biome Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolution Beauty position performs unexpectedly, Biome Technologies 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 Biome Technologies will offset losses from the drop in Biome Technologies' long position.| Revolution Beauty vs. XLMedia PLC | Revolution Beauty vs. Blackrock World Mining | Revolution Beauty vs. Live Nation Entertainment | Revolution Beauty vs. Beowulf Mining |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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