Correlation Between RBC Bearings and NL Industries

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

Diversification Opportunities for RBC Bearings and NL Industries

-0.64

Correlation Coefficient

RBC Bearings  NL Industries

Excellent diversification

The 3 months correlation between RBC and NL Industries is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of RBC Bearings i.e., RBC Bearings and NL Industries go up and down completely randomly.

Pair Corralation between RBC Bearings and NL Industries

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.62 times more return on investment than NL Industries. However, RBC Bearings Incorporated is 1.62 times less risky than NL Industries. It trades about 0.1 of its potential returns per unit of risk. NL Industries is currently generating about 0.03 per unit of risk. If you would invest  30,628  in RBC Bearings Incorporated on December 20, 2024 and sell it today you would earn a total of  3,206  from holding RBC Bearings Incorporated or generate 10.47% 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.  NL Industries

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.

NL Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NL Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, NL Industries is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RBC Bearings and NL Industries

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

The idea behind RBC Bearings Incorporated and NL Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.