Correlation Between RBC Bearings and HNI Corp

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

Diversification Opportunities for RBC Bearings and HNI Corp

0.79

Correlation Coefficient

RBC Bearings  HNI Corp

Poor diversification

The 3 months correlation between RBC and HNI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of RBC Bearings i.e., RBC Bearings and HNI Corp go up and down completely randomly.

Pair Corralation between RBC Bearings and HNI Corp

Considering the 90-day investment horizon RBC Bearings is expected to generate 1.28 times less return on investment than HNI Corp. But when comparing it to its historical volatility, RBC Bearings Incorporated is 1.13 times less risky than HNI Corp. It trades about 0.07 of its potential returns per unit of risk. HNI Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,367  in HNI Corp on September 24, 2024 and sell it today you would earn a total of  796.00  from holding HNI Corp or generate 18.23% 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.  HNI Corp

RBC Bearings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 1 (%) 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.

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RBC Bearings and HNI Corp

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

The idea behind RBC Bearings Incorporated and HNI Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.