Correlation Between Revlon and Bellring Brands

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

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

Diversification Opportunities for Revlon and Bellring Brands

-0.49

Correlation Coefficient

Revlon  Bellring Brands

Very good diversification

The 3 months correlation between Revlon and Bellring is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Revlon Inc and Bellring Brands LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellring Brands LLC and Revlon 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 Revlon Inc are associated (or correlated) with Bellring Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellring Brands LLC has no effect on the direction of Revlon i.e., Revlon and Bellring Brands go up and down completely randomly.

Pair Corralation between Revlon and Bellring Brands

Assuming the 90 days horizon Revlon Inc is expected to under-perform the Bellring Brands. In addition to that, Revlon is 2.7 times more volatile than Bellring Brands LLC. It trades about -0.25 of its total potential returns per unit of risk. Bellring Brands LLC is currently generating about 0.14 per unit of volatility. If you would invest  2,741  in Bellring Brands LLC on January 24, 2024 and sell it today you would earn a total of  2,767  from holding Bellring Brands LLC or generate 100.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.9%
Values	Daily Returns

Revlon Inc  vs.  Bellring Brands LLC

Revlon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Revlon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Revlon is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Bellring Brands LLC

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Bellring Brands is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Revlon and Bellring Brands

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

The idea behind Revlon Inc and Bellring Brands 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.