Correlation Between RBC Bearings and Tigo Energy

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

Diversification Opportunities for RBC Bearings and Tigo Energy

-0.67

Correlation Coefficient

RBC Bearings  Tigo Energy

Excellent diversification

The 3 months correlation between RBC and Tigo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of RBC Bearings i.e., RBC Bearings and Tigo Energy go up and down completely randomly.

Pair Corralation between RBC Bearings and Tigo Energy

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.27 times more return on investment than Tigo Energy. However, RBC Bearings Incorporated is 3.65 times less risky than Tigo Energy. It trades about 0.06 of its potential returns per unit of risk. Tigo Energy is currently generating about -0.04 per unit of risk. If you would invest  26,798  in RBC Bearings Incorporated on September 29, 2024 and sell it today you would earn a total of  3,221  from holding RBC Bearings Incorporated or generate 12.02% 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.  Tigo Energy

RBC Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Bearings Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tigo Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RBC Bearings and Tigo Energy

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

The idea behind RBC Bearings Incorporated and Tigo Energy 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.