Correlation Between RBC Bearings and Techtronic Industries

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

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

Diversification Opportunities for RBC Bearings and Techtronic Industries

-0.27

Correlation Coefficient

RBC Bearings  Techtronic Industries

Very good diversification

The 3 months correlation between RBC and Techtronic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Techtronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries and RBC Bearings 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 RBC Bearings Incorporated are associated (or correlated) with Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of RBC Bearings i.e., RBC Bearings and Techtronic Industries go up and down completely randomly.

Pair Corralation between RBC Bearings and Techtronic Industries

Assuming the 90 days horizon RBC Bearings Incorporated is expected to under-perform the Techtronic Industries. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 2.35 times less risky than Techtronic Industries. The stock trades about -0.57 of its potential returns per unit of risk. The Techtronic Industries is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  1,395  in Techtronic Industries on October 8, 2024 and sell it today you would lose (98.00) from holding Techtronic Industries or give up 7.03% of portfolio value over 90 days.

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

RBC Bearings Incorporated  vs.  Techtronic Industries

RBC Bearings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Techtronic Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Techtronic Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RBC Bearings and Techtronic Industries

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

The idea behind RBC Bearings Incorporated and Techtronic Industries 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.