Correlation Between Austin Engineering and Rev

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

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

Diversification Opportunities for Austin Engineering and Rev

0.56

Correlation Coefficient

Austin Engineering  Rev

Very weak diversification

The 3 months correlation between Austin and Rev is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and Rev Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rev Group and Austin Engineering 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 Austin Engineering Limited 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 Austin Engineering i.e., Austin Engineering and Rev go up and down completely randomly.

Pair Corralation between Austin Engineering and Rev

Assuming the 90 days horizon Austin Engineering Limited is expected to under-perform the Rev. In addition to that, Austin Engineering is 2.39 times more volatile than Rev Group. It trades about -0.3 of its total potential returns per unit of risk. Rev Group is currently generating about -0.3 per unit of volatility. If you would invest  3,341  in Rev Group on December 4, 2024 and sell it today you would lose (532.00) from holding Rev Group or give up 15.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Austin Engineering Limited  vs.  Rev Group

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Austin Engineering 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

Very Weak

Over the last 90 days Rev Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Austin Engineering and Rev

The main advantage of trading using opposite Austin Engineering and Rev positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austin Engineering 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 Austin Engineering Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.