Correlation Between EVS Broadcast and RBC Bearings

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

By analyzing existing cross correlation between EVS Broadcast Equipment and RBC Bearings Incorporated, you can compare the effects of market volatilities on EVS Broadcast and RBC Bearings 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 EVS Broadcast with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of EVS Broadcast and RBC Bearings.

Diversification Opportunities for EVS Broadcast and RBC Bearings

0.25

Correlation Coefficient

EVS Broadcast  RBC Bearings

Modest diversification

The 3 months correlation between EVS and RBC is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding EVS Broadcast Equipment and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and EVS Broadcast 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 EVS Broadcast Equipment are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of EVS Broadcast i.e., EVS Broadcast and RBC Bearings go up and down completely randomly.

Pair Corralation between EVS Broadcast and RBC Bearings

Assuming the 90 days trading horizon EVS Broadcast is expected to generate 6.15 times less return on investment than RBC Bearings. In addition to that, EVS Broadcast is 1.12 times more volatile than RBC Bearings Incorporated. It trades about 0.05 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.35 per unit of volatility. If you would invest  29,000  in RBC Bearings Incorporated on October 25, 2024 and sell it today you would earn a total of  2,000  from holding RBC Bearings Incorporated or generate 6.9% return on investment over 90 days.

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

EVS Broadcast Equipment  vs.  RBC Bearings Incorporated

EVS Broadcast Equipment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EVS Broadcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RBC Bearings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RBC Bearings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EVS Broadcast and RBC Bearings

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

The idea behind EVS Broadcast Equipment and RBC Bearings Incorporated 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.