Correlation Between Rev and Shyft

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

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

Diversification Opportunities for Rev and Shyft

0.76

Correlation Coefficient

Rev  Shyft

Poor diversification

The 3 months correlation between Rev and Shyft is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Shyft Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyft Group 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 Shyft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyft Group has no effect on the direction of Rev i.e., Rev and Shyft go up and down completely randomly.

Pair Corralation between Rev and Shyft

Given the investment horizon of 90 days Rev is expected to generate 1.26 times less return on investment than Shyft. In addition to that, Rev is 1.16 times more volatile than Shyft Group. It trades about 0.03 of its total potential returns per unit of risk. Shyft Group is currently generating about 0.04 per unit of volatility. If you would invest  1,341  in Shyft Group on September 3, 2024 and sell it today you would earn a total of  69.00  from holding Shyft Group or generate 5.15% return on investment over 90 days.

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

Rev Group  vs.  Shyft Group

Rev Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rev is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shyft Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shyft Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Shyft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rev and Shyft

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

The idea behind Rev Group and Shyft 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.