Correlation Between RBC Bearings and BKV

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

Diversification Opportunities for RBC Bearings and BKV

0.65

Correlation Coefficient

RBC Bearings  BKV

Poor diversification

The 3 months correlation between RBC and BKV is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and BKV Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKV Corporation 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 BKV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKV Corporation has no effect on the direction of RBC Bearings i.e., RBC Bearings and BKV go up and down completely randomly.

Pair Corralation between RBC Bearings and BKV

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the BKV. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 2.47 times less risky than BKV. The stock trades about -0.6 of its potential returns per unit of risk. The BKV Corporation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,158  in BKV Corporation on October 10, 2024 and sell it today you would earn a total of  184.00  from holding BKV Corporation or generate 8.53% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  BKV Corp.

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.

BKV Corporation

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and BKV

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

The idea behind RBC Bearings Incorporated and BKV Corporation 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.