Correlation Between Rev and Hyster Yale

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

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

Diversification Opportunities for Rev and Hyster Yale

0.27

Correlation Coefficient

Rev  Hyster Yale

Modest diversification

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

Pair Corralation between Rev and Hyster Yale

Given the investment horizon of 90 days Rev is expected to generate 1.6 times less return on investment than Hyster Yale. But when comparing it to its historical volatility, Rev Group is 2.46 times less risky than Hyster Yale. It trades about 0.32 of its potential returns per unit of risk. Hyster Yale Materials Handling is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,072  in Hyster Yale Materials Handling on February 16, 2024 and sell it today you would earn a total of  1,548  from holding Hyster Yale Materials Handling or generate 25.49% return on investment over 90 days.

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

Rev Group  vs.  Hyster Yale Materials Handling

Rev Group

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Rev reported solid returns over the last few months and may actually be approaching a breakup point.

Hyster Yale Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyster Yale Materials Handling are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Hyster Yale showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rev and Hyster Yale

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

The idea behind Rev Group and Hyster Yale Materials Handling 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.