Correlation Between RBC Bearings and NETGEAR

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

Diversification Opportunities for RBC Bearings and NETGEAR

-0.04

Correlation Coefficient

RBC Bearings  NETGEAR

Good diversification

The 3 months correlation between RBC and NETGEAR is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of RBC Bearings i.e., RBC Bearings and NETGEAR go up and down completely randomly.

Pair Corralation between RBC Bearings and NETGEAR

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.69 times more return on investment than NETGEAR. However, RBC Bearings Incorporated is 1.45 times less risky than NETGEAR. It trades about 0.1 of its potential returns per unit of risk. NETGEAR is currently generating about -0.07 per unit of risk. If you would invest  30,019  in RBC Bearings Incorporated on December 27, 2024 and sell it today you would earn a total of  3,217  from holding RBC Bearings Incorporated or generate 10.72% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with RBC Bearings and NETGEAR

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

The idea behind RBC Bearings Incorporated and NETGEAR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.