Correlation Between Rev and Austin Engineering

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

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

Diversification Opportunities for Rev and Austin Engineering

0.59

Correlation Coefficient

Rev  Austin Engineering

Very weak diversification

The 3 months correlation between Rev and Austin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering 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 Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Rev i.e., Rev and Austin Engineering go up and down completely randomly.

Pair Corralation between Rev and Austin Engineering

Given the investment horizon of 90 days Rev Group is expected to generate 0.51 times more return on investment than Austin Engineering. However, Rev Group is 1.95 times less risky than Austin Engineering. It trades about 0.06 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about -0.11 per unit of risk. If you would invest  3,133  in Rev Group on December 27, 2024 and sell it today you would earn a total of  234.00  from holding Rev Group or generate 7.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Rev Group  vs.  Austin Engineering Limited

Rev Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Rev may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Rev and Austin Engineering

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

The idea behind Rev Group and Austin Engineering Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.