Correlation Between Fox Factory and REV

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

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

Diversification Opportunities for Fox Factory and REV

-0.73

Correlation Coefficient

Fox Factory  REV

Pay attention - limited upside

The 3 months correlation between Fox and REV is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fox Factory Holding and REV Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REV Group and Fox Factory 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 Fox Factory Holding 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 Fox Factory i.e., Fox Factory and REV go up and down completely randomly.

Pair Corralation between Fox Factory and REV

Assuming the 90 days horizon Fox Factory Holding is expected to under-perform the REV. In addition to that, Fox Factory is 1.32 times more volatile than REV Group. It trades about -0.32 of its total potential returns per unit of risk. REV Group is currently generating about 0.06 per unit of volatility. If you would invest  2,120  in REV Group on February 4, 2024 and sell it today you would earn a total of  40.00  from holding REV Group or generate 1.89% return on investment over 90 days.

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

Fox Factory Holding  vs.  REV Group

Fox Factory Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fox Factory Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

REV Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REV Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fox Factory and REV

The main advantage of trading using opposite Fox Factory and REV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fox Factory 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 Fox Factory Holding 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.