Correlation Between RBC Bearings and Logan Ridge

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

Diversification Opportunities for RBC Bearings and Logan Ridge

0.73

Correlation Coefficient

RBC Bearings  Logan Ridge

Poor diversification

The 3 months correlation between RBC and Logan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of RBC Bearings i.e., RBC Bearings and Logan Ridge go up and down completely randomly.

Pair Corralation between RBC Bearings and Logan Ridge

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the Logan Ridge. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 1.3 times less risky than Logan Ridge. The stock trades about -0.52 of its potential returns per unit of risk. The Logan Ridge Finance is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  2,540  in Logan Ridge Finance on September 24, 2024 and sell it today you would lose (89.50) from holding Logan Ridge Finance or give up 3.52% 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.  Logan Ridge Finance

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.

Logan Ridge Finance

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RBC Bearings and Logan Ridge

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

The idea behind RBC Bearings Incorporated and Logan Ridge Finance 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.