Correlation Between RBC Bearings and Cardinal Health

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

Diversification Opportunities for RBC Bearings and Cardinal Health

0.56

Correlation Coefficient

RBC Bearings  Cardinal Health

Very weak diversification

The 3 months correlation between RBC and Cardinal is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of RBC Bearings i.e., RBC Bearings and Cardinal Health go up and down completely randomly.

Pair Corralation between RBC Bearings and Cardinal Health

Considering the 90-day investment horizon RBC Bearings is expected to generate 1.85 times less return on investment than Cardinal Health. In addition to that, RBC Bearings is 1.68 times more volatile than Cardinal Health. It trades about 0.05 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.17 per unit of volatility. If you would invest  11,532  in Cardinal Health on December 17, 2024 and sell it today you would earn a total of  1,268  from holding Cardinal Health or generate 11.0% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Cardinal Health

RBC Bearings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) 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.

Cardinal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with RBC Bearings and Cardinal Health

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

The idea behind RBC Bearings Incorporated and Cardinal Health 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 CEOs Directory module to screen CEOs from public companies around the world.