Correlation Between RBC Bearings and ARIA Wireless

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

Diversification Opportunities for RBC Bearings and ARIA Wireless

0.0

Correlation Coefficient

RBC Bearings  ARIA Wireless

Pay attention - limited upside

The 3 months correlation between RBC and ARIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and ARIA Wireless Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARIA Wireless Systems 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 ARIA Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARIA Wireless Systems has no effect on the direction of RBC Bearings i.e., RBC Bearings and ARIA Wireless go up and down completely randomly.

Pair Corralation between RBC Bearings and ARIA Wireless

Considering the 90-day investment horizon RBC Bearings is expected to generate 59.54 times less return on investment than ARIA Wireless. But when comparing it to its historical volatility, RBC Bearings Incorporated is 33.3 times less risky than ARIA Wireless. It trades about 0.04 of its potential returns per unit of risk. ARIA Wireless Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18.00  in ARIA Wireless Systems on October 23, 2024 and sell it today you would lose (17.99) from holding ARIA Wireless Systems or give up 99.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

RBC Bearings Incorporated  vs.  ARIA Wireless Systems

RBC Bearings

Risk-Adjusted Performance

7 of 100

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 February 2025.

ARIA Wireless Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARIA Wireless Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ARIA Wireless is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Bearings and ARIA Wireless

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

The idea behind RBC Bearings Incorporated and ARIA Wireless Systems 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.