Correlation Between RBC Bearings and Sphere Entertainment

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

Diversification Opportunities for RBC Bearings and Sphere Entertainment

-0.62

Correlation Coefficient

RBC Bearings  Sphere Entertainment

Excellent diversification

The 3 months correlation between RBC and Sphere is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of RBC Bearings i.e., RBC Bearings and Sphere Entertainment go up and down completely randomly.

Pair Corralation between RBC Bearings and Sphere Entertainment

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the Sphere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings Incorporated is 2.72 times less risky than Sphere Entertainment. The stock trades about -0.55 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,785  in Sphere Entertainment Co on October 6, 2024 and sell it today you would earn a total of  461.00  from holding Sphere Entertainment Co or generate 12.18% 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.  Sphere Entertainment Co

RBC Bearings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) 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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with RBC Bearings and Sphere Entertainment

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

The idea behind RBC Bearings Incorporated and Sphere Entertainment Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.