Correlation Between Revolution Beauty and Compass Group

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

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

Diversification Opportunities for Revolution Beauty and Compass Group

-0.87

Correlation Coefficient

Revolution Beauty  Compass Group

Pay attention - limited upside

The 3 months correlation between Revolution and Compass is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and Revolution Beauty 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 Revolution Beauty Group are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Compass Group go up and down completely randomly.

Pair Corralation between Revolution Beauty and Compass Group

Assuming the 90 days trading horizon Revolution Beauty Group is expected to generate 3.7 times more return on investment than Compass Group. However, Revolution Beauty is 3.7 times more volatile than Compass Group PLC. It trades about 0.2 of its potential returns per unit of risk. Compass Group PLC is currently generating about 0.0 per unit of risk. If you would invest  1,230  in Revolution Beauty Group on September 23, 2024 and sell it today you would earn a total of  170.00  from holding Revolution Beauty Group or generate 13.82% return on investment over 90 days.

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

Revolution Beauty Group  vs.  Compass Group PLC

Revolution Beauty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Revolution Beauty Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Compass Group PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Group PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Compass Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Revolution Beauty and Compass Group

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

The idea behind Revolution Beauty Group and Compass Group PLC 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 CEOs Directory module to screen CEOs from public companies around the world.