Correlation Between RBC Bearings and Global Lights

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

Diversification Opportunities for RBC Bearings and Global Lights

0.61

Correlation Coefficient

RBC Bearings  Global Lights

Poor diversification

The 3 months correlation between RBC and Global is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Global Lights Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Lights 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 Global Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Lights Acquisition has no effect on the direction of RBC Bearings i.e., RBC Bearings and Global Lights go up and down completely randomly.

Pair Corralation between RBC Bearings and Global Lights

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 10.99 times more return on investment than Global Lights. However, RBC Bearings is 10.99 times more volatile than Global Lights Acquisition. It trades about 0.09 of its potential returns per unit of risk. Global Lights Acquisition is currently generating about 0.22 per unit of risk. If you would invest  30,463  in RBC Bearings Incorporated on December 24, 2024 and sell it today you would earn a total of  3,048  from holding RBC Bearings Incorporated or generate 10.01% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Global Lights Acquisition

RBC Bearings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) 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.

Global Lights Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights 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 Global Lights

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

The idea behind RBC Bearings Incorporated and Global Lights 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.