Correlation Between Lucid and RBC Bearings

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

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

Diversification Opportunities for Lucid and RBC Bearings

-0.61

Correlation Coefficient

Lucid  RBC Bearings

Excellent diversification

The 3 months correlation between Lucid and RBC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Lucid 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 Lucid Group 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 Lucid i.e., Lucid and RBC Bearings go up and down completely randomly.

Pair Corralation between Lucid and RBC Bearings

Given the investment horizon of 90 days Lucid Group is expected to under-perform the RBC Bearings. In addition to that, Lucid is 3.16 times more volatile than RBC Bearings Incorporated. It trades about -0.01 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.03 per unit of volatility. If you would invest  28,625  in RBC Bearings Incorporated on September 20, 2024 and sell it today you would earn a total of  2,587  from holding RBC Bearings Incorporated or generate 9.04% return on investment over 90 days.

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

Lucid Group  vs.  RBC Bearings Incorporated

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RBC Bearings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) 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 January 2025.

Pair Trading with Lucid and RBC Bearings

The main advantage of trading using opposite Lucid and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.