Correlation Between Alamo and Rev

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

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

Diversification Opportunities for Alamo and Rev

0.18

Correlation Coefficient

Alamo  Rev

Average diversification

The 3 months correlation between Alamo and Rev is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alamo Group and Rev Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rev Group and Alamo 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 Alamo Group are associated (or correlated) with Rev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rev Group has no effect on the direction of Alamo i.e., Alamo and Rev go up and down completely randomly.

Pair Corralation between Alamo and Rev

Considering the 90-day investment horizon Alamo is expected to generate 7.17 times less return on investment than Rev. But when comparing it to its historical volatility, Alamo Group is 1.86 times less risky than Rev. It trades about 0.01 of its potential returns per unit of risk. Rev Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,132  in Rev Group on December 28, 2024 and sell it today you would earn a total of  201.00  from holding Rev Group or generate 6.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alamo Group  vs.  Rev Group

Alamo Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alamo Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Alamo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Rev Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Rev may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alamo and Rev

The main advantage of trading using opposite Alamo and Rev positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alamo position performs unexpectedly, Rev 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 Rev will offset losses from the drop in Rev's long position.

The idea behind Alamo Group and Rev 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.