Correlation Between RBC Bearings and United Parks

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

Diversification Opportunities for RBC Bearings and United Parks

0.84

Correlation Coefficient

RBC Bearings  United Parks

Very poor diversification

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

Pair Corralation between RBC Bearings and United Parks

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 1.99 times less risky than United Parks. The stock trades about -0.54 of its potential returns per unit of risk. The United Parks Resorts is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,723  in United Parks Resorts on September 27, 2024 and sell it today you would lose (273.00) from holding United Parks Resorts or give up 4.77% 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.  United Parks Resorts

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.

United Parks Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RBC Bearings and United Parks

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

The idea behind RBC Bearings Incorporated and United Parks Resorts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.