Correlation Between Revolution Beauty and Henderson High
Can any of the company-specific risk be diversified away by investing in both Revolution Beauty and Henderson High 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 Henderson High 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 Henderson High Income, you can compare the effects of market volatilities on Revolution Beauty and Henderson High 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 Henderson High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Beauty and Henderson High.
Diversification Opportunities for Revolution Beauty and Henderson High
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Revolution and Henderson is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Henderson High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson High Income 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 Henderson High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson High Income has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Henderson High go up and down completely randomly.
Pair Corralation between Revolution Beauty and Henderson High
Assuming the 90 days trading horizon Revolution Beauty Group is expected to generate 6.86 times more return on investment than Henderson High. However, Revolution Beauty is 6.86 times more volatile than Henderson High Income. It trades about 0.02 of its potential returns per unit of risk. Henderson High Income is currently generating about 0.03 per unit of risk. If you would invest 1,900 in Revolution Beauty Group on August 30, 2024 and sell it today you would lose (665.00) from holding Revolution Beauty Group or give up 35.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Revolution Beauty Group vs. Henderson High Income
Performance |
| Timeline |
| Revolution Beauty |
| Henderson High Income |
Revolution Beauty and Henderson High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Revolution Beauty and Henderson High
The main advantage of trading using opposite Revolution Beauty and Henderson High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolution Beauty position performs unexpectedly, Henderson High 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 Henderson High will offset losses from the drop in Henderson High's long position.| Revolution Beauty vs. Samsung Electronics Co | Revolution Beauty vs. Samsung Electronics Co | Revolution Beauty vs. Toyota Motor Corp | Revolution Beauty vs. MOL Hungarian Oil |
| Henderson High vs. Neometals | Henderson High vs. Playtech Plc | Henderson High vs. CVS Health Corp | Henderson High vs. Universal Health Services |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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