Correlation Between Marstons PLC and Revolution Beauty

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

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

Diversification Opportunities for Marstons PLC and Revolution Beauty

0.4

Correlation Coefficient

Marstons PLC  Revolution Beauty

Very weak diversification

The 3 months correlation between Marstons and Revolution is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty and Marstons PLC 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 Marstons PLC 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 Marstons PLC i.e., Marstons PLC and Revolution Beauty go up and down completely randomly.

Pair Corralation between Marstons PLC and Revolution Beauty

Assuming the 90 days trading horizon Marstons PLC is expected to under-perform the Revolution Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Marstons PLC is 2.75 times less risky than Revolution Beauty. The stock trades about -0.03 of its potential returns per unit of risk. The 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	Weak
Accuracy	100.0%
Values	Daily Returns

Marstons PLC  vs.  Revolution Beauty Group

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Marstons PLC is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Marstons PLC and Revolution Beauty

The main advantage of trading using opposite Marstons PLC and Revolution Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marstons PLC 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 Marstons PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.