Correlation Between RBC Bearings and Loews Corp

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

Diversification Opportunities for RBC Bearings and Loews Corp

0.84

Correlation Coefficient

RBC Bearings  Loews Corp

Very poor diversification

The 3 months correlation between RBC and Loews is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of RBC Bearings i.e., RBC Bearings and Loews Corp go up and down completely randomly.

Pair Corralation between RBC Bearings and Loews Corp

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the Loews Corp. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 1.23 times less risky than Loews Corp. The stock trades about -0.62 of its potential returns per unit of risk. The Loews Corp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  8,500  in Loews Corp on October 10, 2024 and sell it today you would lose (205.00) from holding Loews Corp or give up 2.41% of portfolio value over 90 days.

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

RBC Bearings Incorporated  vs.  Loews Corp

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.

Loews Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RBC Bearings and Loews Corp

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

The idea behind RBC Bearings Incorporated and Loews 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.