Correlation Between Rev and Ag Growth

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

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

Diversification Opportunities for Rev and Ag Growth

-0.08

Correlation Coefficient

Rev  Ag Growth

Good diversification

The 3 months correlation between Rev and AGGZF is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International and Rev 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 Rev Group are associated (or correlated) with Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of Rev i.e., Rev and Ag Growth go up and down completely randomly.

Pair Corralation between Rev and Ag Growth

Given the investment horizon of 90 days Rev Group is expected to generate 1.62 times more return on investment than Ag Growth. However, Rev is 1.62 times more volatile than Ag Growth International. It trades about 0.12 of its potential returns per unit of risk. Ag Growth International is currently generating about -0.06 per unit of risk. If you would invest  2,759  in Rev Group on September 13, 2024 and sell it today you would earn a total of  610.00  from holding Rev Group or generate 22.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Rev Group  vs.  Ag Growth International

Rev Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Rev reported solid returns over the last few months and may actually be approaching a breakup point.

Ag Growth International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ag Growth International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rev and Ag Growth

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

The idea behind Rev Group and Ag Growth International 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.