Correlation Between Logan Ridge and RBC Bearings

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

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

Diversification Opportunities for Logan Ridge and RBC Bearings

0.31

Correlation Coefficient

Logan Ridge  RBC Bearings

Weak diversification

The 3 months correlation between Logan and RBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Logan Ridge Finance and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Logan Ridge 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 Logan Ridge Finance 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 Logan Ridge i.e., Logan Ridge and RBC Bearings go up and down completely randomly.

Pair Corralation between Logan Ridge and RBC Bearings

Given the investment horizon of 90 days Logan Ridge Finance is expected to generate 0.7 times more return on investment than RBC Bearings. However, Logan Ridge Finance is 1.43 times less risky than RBC Bearings. It trades about -0.05 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about -0.26 per unit of risk. If you would invest  2,475  in Logan Ridge Finance on December 7, 2024 and sell it today you would lose (25.00) from holding Logan Ridge Finance or give up 1.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Logan Ridge Finance  vs.  RBC Bearings Incorporated

Logan Ridge Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Logan Ridge Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

RBC Bearings

Risk-Adjusted Performance

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 April 2025.

Pair Trading with Logan Ridge and RBC Bearings

The main advantage of trading using opposite Logan Ridge and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Logan Ridge 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 Logan Ridge Finance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.