Correlation Between RBC Bearings and Spectrum Brands

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

Diversification Opportunities for RBC Bearings and Spectrum Brands

0.44

Correlation Coefficient

RBC Bearings  Spectrum Brands

Very weak diversification

The 3 months correlation between RBC and Spectrum is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings 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 Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of RBC Bearings i.e., RBC Bearings and Spectrum Brands go up and down completely randomly.

Pair Corralation between RBC Bearings and Spectrum Brands

Considering the 90-day investment horizon RBC Bearings is expected to generate 1.25 times less return on investment than Spectrum Brands. But when comparing it to its historical volatility, RBC Bearings Incorporated is 1.03 times less risky than Spectrum Brands. It trades about 0.04 of its potential returns per unit of risk. Spectrum Brands Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,238  in Spectrum Brands Holdings on October 12, 2024 and sell it today you would earn a total of  2,240  from holding Spectrum Brands Holdings or generate 35.91% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Spectrum Brands Holdings

RBC Bearings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 5 (%) 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 February 2025.

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with RBC Bearings and Spectrum Brands

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

The idea behind RBC Bearings Incorporated and Spectrum Brands Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.