Correlation Between Virgin Group and RBC Bearings

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

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

Diversification Opportunities for Virgin Group and RBC Bearings

0.64

Correlation Coefficient

Virgin Group  RBC Bearings

Poor diversification

The 3 months correlation between Virgin and RBC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Group Acquisition and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Virgin Group 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 Virgin Group Acquisition 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 Virgin Group i.e., Virgin Group and RBC Bearings go up and down completely randomly.

Pair Corralation between Virgin Group and RBC Bearings

Given the investment horizon of 90 days Virgin Group Acquisition is expected to generate 2.76 times more return on investment than RBC Bearings. However, Virgin Group is 2.76 times more volatile than RBC Bearings Incorporated. It trades about 0.08 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about -0.62 per unit of risk. If you would invest  149.00  in Virgin Group Acquisition on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Virgin Group Acquisition or generate 3.36% return on investment over 90 days.

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

Virgin Group Acquisition  vs.  RBC Bearings Incorporated

Virgin Group Acquisition

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

RBC Bearings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 5 (%) 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 Virgin Group and RBC Bearings

The main advantage of trading using opposite Virgin Group and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Group 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 Virgin Group Acquisition 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.