Correlation Between RBC Bearings and Bill

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Bill 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 Bill 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 Bill Com Holdings, you can compare the effects of market volatilities on RBC Bearings and Bill 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 Bill. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Bill.

Diversification Opportunities for RBC Bearings and Bill

0.9

Correlation Coefficient

RBC Bearings  Bill

Almost no diversification

The 3 months correlation between RBC and Bill is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Bill Com Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bill Com Holdings 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 Bill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bill Com Holdings has no effect on the direction of RBC Bearings i.e., RBC Bearings and Bill go up and down completely randomly.

Pair Corralation between RBC Bearings and Bill

Considering the 90-day investment horizon RBC Bearings is expected to generate 2.11 times less return on investment than Bill. But when comparing it to its historical volatility, RBC Bearings Incorporated is 1.95 times less risky than Bill. It trades about 0.03 of its potential returns per unit of risk. Bill Com Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,723  in Bill Com Holdings on September 25, 2024 and sell it today you would earn a total of  1,222  from holding Bill Com Holdings or generate 15.82% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Bill Com Holdings

RBC Bearings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bill Com Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and Bill

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

The idea behind RBC Bearings Incorporated and Bill Com Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.