Correlation Between Rev and Astec Industries

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

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

Diversification Opportunities for Rev and Astec Industries

0.8

Correlation Coefficient

Rev  Astec Industries

Very poor diversification

The 3 months correlation between Rev and Astec is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Rev i.e., Rev and Astec Industries go up and down completely randomly.

Pair Corralation between Rev and Astec Industries

Given the investment horizon of 90 days Rev Group is expected to under-perform the Astec Industries. In addition to that, Rev is 1.17 times more volatile than Astec Industries. It trades about 0.0 of its total potential returns per unit of risk. Astec Industries is currently generating about 0.09 per unit of volatility. If you would invest  3,371  in Astec Industries on August 30, 2024 and sell it today you would earn a total of  463.00  from holding Astec Industries or generate 13.73% return on investment over 90 days.

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

Rev Group  vs.  Astec Industries

Rev Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rev Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rev is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Astec Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Astec Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rev and Astec Industries

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

The idea behind Rev Group and Astec Industries 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.