Correlation Between RBC Bearings and Vita Coco

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

Diversification Opportunities for RBC Bearings and Vita Coco

0.38

Correlation Coefficient

RBC Bearings  Vita Coco

Weak diversification

The 3 months correlation between RBC and Vita is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of RBC Bearings i.e., RBC Bearings and Vita Coco go up and down completely randomly.

Pair Corralation between RBC Bearings and Vita Coco

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.62 times more return on investment than Vita Coco. However, RBC Bearings Incorporated is 1.61 times less risky than Vita Coco. It trades about 0.09 of its potential returns per unit of risk. Vita Coco is currently generating about -0.06 per unit of risk. If you would invest  30,393  in RBC Bearings Incorporated on December 26, 2024 and sell it today you would earn a total of  2,843  from holding RBC Bearings Incorporated or generate 9.35% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Vita Coco

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 6 (%) 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.

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with RBC Bearings and Vita Coco

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

The idea behind RBC Bearings Incorporated and Vita Coco 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.