Correlation Between Revolution Beauty and Flutter Entertainment

Can any of the company-specific risk be diversified away by investing in both Revolution Beauty and Flutter Entertainment 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 Flutter Entertainment 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 Flutter Entertainment PLC, you can compare the effects of market volatilities on Revolution Beauty and Flutter Entertainment 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 Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Beauty and Flutter Entertainment.

Diversification Opportunities for Revolution Beauty and Flutter Entertainment

-0.74

Correlation Coefficient

Revolution Beauty  Flutter Entertainment

Pay attention - limited upside

The 3 months correlation between Revolution and Flutter is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Beauty Group and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of Revolution Beauty i.e., Revolution Beauty and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Revolution Beauty and Flutter Entertainment

Assuming the 90 days trading horizon Revolution Beauty Group is expected to generate 2.56 times more return on investment than Flutter Entertainment. However, Revolution Beauty is 2.56 times more volatile than Flutter Entertainment PLC. It trades about 0.16 of its potential returns per unit of risk. Flutter Entertainment PLC is currently generating about -0.21 per unit of risk. If you would invest  1,243  in Revolution Beauty Group on September 27, 2024 and sell it today you would earn a total of  131.00  from holding Revolution Beauty Group or generate 10.54% return on investment over 90 days.

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

Revolution Beauty Group  vs.  Flutter Entertainment 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.

Flutter Entertainment PLC

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Revolution Beauty and Flutter Entertainment

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

The idea behind Revolution Beauty Group and Flutter Entertainment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.