Correlation Between Rev and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Rev and CEA Industries 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 Rev and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rev Group and CEA Industries Warrant, you can compare the effects of market volatilities on Rev and CEA Industries 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 Rev with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rev and CEA Industries.
Diversification Opportunities for Rev and CEA Industries
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Rev and CEA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and CEA Industries Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries Warrant and Rev 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 Rev Group are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries Warrant has no effect on the direction of Rev i.e., Rev and CEA Industries go up and down completely randomly.
Pair Corralation between Rev and CEA Industries
Given the investment horizon of 90 days Rev is expected to generate 60.94 times less return on investment than CEA Industries. But when comparing it to its historical volatility, Rev Group is 26.98 times less risky than CEA Industries. It trades about 0.13 of its potential returns per unit of risk. CEA Industries Warrant is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 0.61 in CEA Industries Warrant on September 12, 2024 and sell it today you would earn a total of 2.09 from holding CEA Industries Warrant or generate 342.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 35.94% |
| Values | Daily Returns |
Rev Group vs. CEA Industries Warrant
Performance |
| Timeline |
| Rev Group |
| CEA Industries Warrant |
Rev and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rev and CEA Industries
The main advantage of trading using opposite Rev and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rev position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.The idea behind Rev Group and CEA Industries Warrant 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.| CEA Industries vs. CEA Industries | CEA Industries vs. Thayer Ventures Acquisition | CEA Industries vs. Iveda Solutions Warrant |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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