Correlation Between American Premium and Rev

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

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

Diversification Opportunities for American Premium and Rev

0.27

Correlation Coefficient

American Premium  Rev

Modest diversification

The 3 months correlation between American and Rev is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Premium Water and Rev Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rev Group and American Premium 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 American Premium Water are associated (or correlated) with Rev. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rev Group has no effect on the direction of American Premium i.e., American Premium and Rev go up and down completely randomly.

Pair Corralation between American Premium and Rev

Given the investment horizon of 90 days American Premium Water is expected to generate 59.42 times more return on investment than Rev. However, American Premium is 59.42 times more volatile than Rev Group. It trades about 0.16 of its potential returns per unit of risk. Rev Group is currently generating about 0.07 per unit of risk. If you would invest  0.00  in American Premium Water on March 7, 2024 and sell it today you would earn a total of  0.04  from holding American Premium Water or generate 9.223372036854776E16% return on investment over 90 days.

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

American Premium Water  vs.  Rev Group

American Premium Water

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Rev Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 12 (%) 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.

Pair Trading with American Premium and Rev

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

The idea behind American Premium Water and Rev Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.