Correlation Between ARIA Wireless and RBC Bearings

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

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

Diversification Opportunities for ARIA Wireless and RBC Bearings

0.0

Correlation Coefficient

ARIA Wireless  RBC Bearings

Pay attention - limited upside

The 3 months correlation between ARIA and RBC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ARIA Wireless Systems and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and ARIA Wireless 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 ARIA Wireless Systems 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 ARIA Wireless i.e., ARIA Wireless and RBC Bearings go up and down completely randomly.

Pair Corralation between ARIA Wireless and RBC Bearings

Given the investment horizon of 90 days ARIA Wireless Systems is expected to generate 33.3 times more return on investment than RBC Bearings. However, ARIA Wireless is 33.3 times more volatile than RBC Bearings Incorporated. It trades about 0.07 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.04 per unit of risk. If you would invest  18.00  in ARIA Wireless Systems on October 23, 2024 and sell it today you would lose (17.99) from holding ARIA Wireless Systems or give up 99.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

ARIA Wireless Systems  vs.  RBC Bearings Incorporated

ARIA Wireless Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARIA Wireless Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ARIA Wireless is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

RBC Bearings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ARIA Wireless and RBC Bearings

The main advantage of trading using opposite ARIA Wireless and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARIA Wireless 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 ARIA Wireless Systems 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 Global Correlations module to find global opportunities by holding instruments from different markets.