Correlation Between Rev and AmeraMex International

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

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

Diversification Opportunities for Rev and AmeraMex International

-0.2

Correlation Coefficient

Rev  AmeraMex International

Good diversification

The 3 months correlation between Rev and AmeraMex is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and AmeraMex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmeraMex 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 AmeraMex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmeraMex International has no effect on the direction of Rev i.e., Rev and AmeraMex International go up and down completely randomly.

Pair Corralation between Rev and AmeraMex International

Given the investment horizon of 90 days Rev is expected to generate 1.17 times less return on investment than AmeraMex International. But when comparing it to its historical volatility, Rev Group is 3.8 times less risky than AmeraMex International. It trades about 0.09 of its potential returns per unit of risk. AmeraMex International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  43.00  in AmeraMex International on December 4, 2024 and sell it today you would lose (23.00) from holding AmeraMex International or give up 53.49% of portfolio value over 90 days.

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

Rev Group  vs.  AmeraMex International

Rev Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rev Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

AmeraMex International

Risk-Adjusted Performance

Very Weak

Over the last 90 days AmeraMex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rev and AmeraMex International

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

The idea behind Rev Group and AmeraMex 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..