Correlation Between Gap, and Revolve Group

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

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

Diversification Opportunities for Gap, and Revolve Group

0.81

Correlation Coefficient

Gap,  Revolve Group

Very poor diversification

The 3 months correlation between Gap, and Revolve is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC and Gap, 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 The Gap, are associated (or correlated) with Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of Gap, i.e., Gap, and Revolve Group go up and down completely randomly.

Pair Corralation between Gap, and Revolve Group

Considering the 90-day investment horizon The Gap, is expected to under-perform the Revolve Group. But the stock apears to be less risky and, when comparing its historical volatility, The Gap, is 1.6 times less risky than Revolve Group. The stock trades about -0.05 of its potential returns per unit of risk. The Revolve Group LLC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,502  in Revolve Group LLC on September 23, 2024 and sell it today you would lose (92.00) from holding Revolve Group LLC or give up 2.63% of portfolio value over 90 days.

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

The Gap,  vs.  Revolve Group LLC

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Revolve Group LLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gap, and Revolve Group

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

The idea behind The Gap, and Revolve Group LLC 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.