Correlation Between Aldel Financial and RBC Bearings

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

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

Diversification Opportunities for Aldel Financial and RBC Bearings

-0.28

Correlation Coefficient

Aldel Financial  RBC Bearings

Very good diversification

The 3 months correlation between Aldel and RBC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and RBC Bearings go up and down completely randomly.

Pair Corralation between Aldel Financial and RBC Bearings

Assuming the 90 days horizon Aldel Financial is expected to generate 20.17 times less return on investment than RBC Bearings. But when comparing it to its historical volatility, Aldel Financial II is 17.02 times less risky than RBC Bearings. It trades about 0.08 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  28,443  in RBC Bearings Incorporated on September 22, 2024 and sell it today you would earn a total of  2,185  from holding RBC Bearings Incorporated or generate 7.68% return on investment over 90 days.

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

Aldel Financial II  vs.  RBC Bearings Incorporated

Aldel Financial II

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

RBC Bearings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aldel Financial and RBC Bearings

The main advantage of trading using opposite Aldel Financial and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.