Correlation Between RBC Bearings and Distoken Acquisition

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

Diversification Opportunities for RBC Bearings and Distoken Acquisition

0.78

Correlation Coefficient

RBC Bearings  Distoken Acquisition

Poor diversification

The 3 months correlation between RBC and Distoken is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of RBC Bearings i.e., RBC Bearings and Distoken Acquisition go up and down completely randomly.

Pair Corralation between RBC Bearings and Distoken Acquisition

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 3.83 times more return on investment than Distoken Acquisition. However, RBC Bearings is 3.83 times more volatile than Distoken Acquisition. It trades about 0.07 of its potential returns per unit of risk. Distoken Acquisition is currently generating about 0.09 per unit of risk. If you would invest  28,123  in RBC Bearings Incorporated on October 9, 2024 and sell it today you would earn a total of  1,909  from holding RBC Bearings Incorporated or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

RBC Bearings Incorporated  vs.  Distoken Acquisition

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.

Distoken Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Distoken Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RBC Bearings and Distoken Acquisition

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

The idea behind RBC Bearings Incorporated and Distoken Acquisition 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.