Correlation Between RBC Bearings and FormFactor

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

Diversification Opportunities for RBC Bearings and FormFactor

-0.62

Correlation Coefficient

RBC Bearings  FormFactor

Excellent diversification

The 3 months correlation between RBC and FormFactor is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor 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 FormFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormFactor has no effect on the direction of RBC Bearings i.e., RBC Bearings and FormFactor go up and down completely randomly.

Pair Corralation between RBC Bearings and FormFactor

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.63 times more return on investment than FormFactor. However, RBC Bearings Incorporated is 1.59 times less risky than FormFactor. It trades about 0.09 of its potential returns per unit of risk. FormFactor is currently generating about -0.23 per unit of risk. If you would invest  29,709  in RBC Bearings Incorporated on December 30, 2024 and sell it today you would earn a total of  2,851  from holding RBC Bearings Incorporated or generate 9.6% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  FormFactor

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.

FormFactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days FormFactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RBC Bearings and FormFactor

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

The idea behind RBC Bearings Incorporated and FormFactor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.