Correlation Between Mattel and RBC Bearings

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

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

Diversification Opportunities for Mattel and RBC Bearings

-0.05

Correlation Coefficient

Mattel  RBC Bearings

Good diversification

The 3 months correlation between Mattel and RBC is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Mattel 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 Mattel Inc 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 Mattel i.e., Mattel and RBC Bearings go up and down completely randomly.

Pair Corralation between Mattel and RBC Bearings

Considering the 90-day investment horizon Mattel Inc is expected to generate 1.32 times more return on investment than RBC Bearings. However, Mattel is 1.32 times more volatile than RBC Bearings Incorporated. It trades about -0.12 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about -0.57 per unit of risk. If you would invest  1,903  in Mattel Inc on October 11, 2024 and sell it today you would lose (60.00) from holding Mattel Inc or give up 3.15% of portfolio value over 90 days.

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

Mattel Inc  vs.  RBC Bearings Incorporated

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 Mattel and RBC Bearings

The main advantage of trading using opposite Mattel and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel 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 Mattel Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.