Correlation Between Rev and GreenPower

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

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

Diversification Opportunities for Rev and GreenPower

-0.7

Correlation Coefficient

Rev  GreenPower

Excellent diversification

The 3 months correlation between Rev and GreenPower is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Rev i.e., Rev and GreenPower go up and down completely randomly.

Pair Corralation between Rev and GreenPower

Given the investment horizon of 90 days Rev Group is expected to generate 1.06 times more return on investment than GreenPower. However, Rev is 1.06 times more volatile than GreenPower Motor. It trades about 0.0 of its potential returns per unit of risk. GreenPower Motor is currently generating about -0.25 per unit of risk. If you would invest  3,195  in Rev Group on September 25, 2024 and sell it today you would lose (45.00) from holding Rev Group or give up 1.41% of portfolio value over 90 days.

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

Rev Group  vs.  GreenPower Motor

Rev Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 7 (%) 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.

GreenPower Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Rev and GreenPower

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

The idea behind Rev Group and GreenPower Motor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.