Correlation Between BBB Foods and Revolve Group

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

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

Diversification Opportunities for BBB Foods and Revolve Group

-0.48

Correlation Coefficient

BBB Foods  Revolve Group

Very good diversification

The 3 months correlation between BBB and Revolve is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC and BBB Foods 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 BBB Foods are associated (or correlated) with Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of BBB Foods i.e., BBB Foods and Revolve Group go up and down completely randomly.

Pair Corralation between BBB Foods and Revolve Group

Given the investment horizon of 90 days BBB Foods is expected to generate 0.83 times more return on investment than Revolve Group. However, BBB Foods is 1.21 times less risky than Revolve Group. It trades about 0.09 of its potential returns per unit of risk. Revolve Group LLC is currently generating about 0.03 per unit of risk. If you would invest  1,750  in BBB Foods on October 9, 2024 and sell it today you would earn a total of  1,271  from holding BBB Foods or generate 72.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.26%
Values	Daily Returns

BBB Foods  vs.  Revolve Group LLC

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Revolve Group LLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BBB Foods and Revolve Group

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

The idea behind BBB Foods and Revolve Group LLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.