Correlation Between Empire Metals and Revolution Beauty

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

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

Diversification Opportunities for Empire Metals and Revolution Beauty

0.77

Correlation Coefficient

Empire Metals  Revolution Beauty

Poor diversification

The 3 months correlation between Empire and Revolution is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty and Empire Metals 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 Empire Metals Limited are associated (or correlated) with Revolution Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Beauty has no effect on the direction of Empire Metals i.e., Empire Metals and Revolution Beauty go up and down completely randomly.

Pair Corralation between Empire Metals and Revolution Beauty

Assuming the 90 days trading horizon Empire Metals is expected to generate 5.0 times less return on investment than Revolution Beauty. But when comparing it to its historical volatility, Empire Metals Limited is 1.9 times less risky than Revolution Beauty. It trades about 0.05 of its potential returns per unit of risk. Revolution Beauty Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,625  in Revolution Beauty Group on October 10, 2024 and sell it today you would earn a total of  775.00  from holding Revolution Beauty Group or generate 47.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Empire Metals Limited  vs.  Revolution Beauty Group

Empire Metals Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Empire Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Revolution Beauty

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Beauty Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Revolution Beauty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Metals and Revolution Beauty

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

The idea behind Empire Metals Limited and Revolution Beauty 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.