Correlation Between RBC Bearings and EMCOR

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

Diversification Opportunities for RBC Bearings and EMCOR

0.77

Correlation Coefficient

RBC Bearings  EMCOR

Poor diversification

The 3 months correlation between RBC and EMCOR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of RBC Bearings i.e., RBC Bearings and EMCOR go up and down completely randomly.

Pair Corralation between RBC Bearings and EMCOR

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.69 times more return on investment than EMCOR. However, RBC Bearings Incorporated is 1.44 times less risky than EMCOR. It trades about -0.11 of its potential returns per unit of risk. EMCOR Group is currently generating about -0.22 per unit of risk. If you would invest  32,446  in RBC Bearings Incorporated on September 21, 2024 and sell it today you would lose (1,084) from holding RBC Bearings Incorporated or give up 3.34% of portfolio value over 90 days.

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

RBC Bearings Incorporated  vs.  EMCOR Group

RBC Bearings

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) 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.

EMCOR Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, EMCOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RBC Bearings and EMCOR

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

The idea behind RBC Bearings Incorporated and EMCOR Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.