Correlation Between RBC Bearings and Aurania Resources

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

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

Diversification Opportunities for RBC Bearings and Aurania Resources

0.44

Correlation Coefficient

RBC Bearings  Aurania Resources

Very weak diversification

The 3 months correlation between RBC and Aurania is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources and RBC Bearings 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 RBC Bearings Incorporated are associated (or correlated) with Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of RBC Bearings i.e., RBC Bearings and Aurania Resources go up and down completely randomly.

Pair Corralation between RBC Bearings and Aurania Resources

Considering the 90-day investment horizon RBC Bearings is expected to generate 1.05 times less return on investment than Aurania Resources. But when comparing it to its historical volatility, RBC Bearings Incorporated is 4.32 times less risky than Aurania Resources. It trades about 0.1 of its potential returns per unit of risk. Aurania Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Aurania Resources on December 27, 2024 and sell it today you would lose (2.00) from holding Aurania Resources or give up 7.14% of portfolio value over 90 days.

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

RBC Bearings Incorporated  vs.  Aurania Resources

RBC Bearings

Risk-Adjusted Performance

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 April 2025.

Aurania Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurania Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aurania Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with RBC Bearings and Aurania Resources

The main advantage of trading using opposite RBC Bearings and Aurania Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Aurania Resources 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 Aurania Resources will offset losses from the drop in Aurania Resources' long position.

The idea behind RBC Bearings Incorporated and Aurania Resources 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.