Correlation Between RBC Bearings and PennantPark Floating

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

Diversification Opportunities for RBC Bearings and PennantPark Floating

-0.61

Correlation Coefficient

RBC Bearings  PennantPark Floating

Excellent diversification

The 3 months correlation between RBC and PennantPark is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and PennantPark Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Floating Rate 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 PennantPark Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Floating Rate has no effect on the direction of RBC Bearings i.e., RBC Bearings and PennantPark Floating go up and down completely randomly.

Pair Corralation between RBC Bearings and PennantPark Floating

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the PennantPark Floating. In addition to that, RBC Bearings is 1.57 times more volatile than PennantPark Floating Rate. It trades about -0.52 of its total potential returns per unit of risk. PennantPark Floating Rate is currently generating about -0.14 per unit of volatility. If you would invest  1,092  in PennantPark Floating Rate on September 24, 2024 and sell it today you would lose (20.00) from holding PennantPark Floating Rate or give up 1.83% of portfolio value over 90 days.

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

RBC Bearings Incorporated  vs.  PennantPark Floating Rate

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.

PennantPark Floating Rate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PennantPark Floating Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, PennantPark Floating is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RBC Bearings and PennantPark Floating

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

The idea behind RBC Bearings Incorporated and PennantPark Floating Rate 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.