Correlation Between RBC Bearings and 26442UAN4

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and 26442UAN4 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 26442UAN4 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 DUK 34 01 APR 32, you can compare the effects of market volatilities on RBC Bearings and 26442UAN4 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 26442UAN4. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and 26442UAN4.

Diversification Opportunities for RBC Bearings and 26442UAN4

0.41

Correlation Coefficient

RBC Bearings  26442UAN4

Very weak diversification

The 3 months correlation between RBC and 26442UAN4 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and DUK 34 01 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUK 34 01 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 26442UAN4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUK 34 01 has no effect on the direction of RBC Bearings i.e., RBC Bearings and 26442UAN4 go up and down completely randomly.

Pair Corralation between RBC Bearings and 26442UAN4

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 3.26 times more return on investment than 26442UAN4. However, RBC Bearings is 3.26 times more volatile than DUK 34 01 APR 32. It trades about 0.12 of its potential returns per unit of risk. DUK 34 01 APR 32 is currently generating about -0.01 per unit of risk. If you would invest  28,816  in RBC Bearings Incorporated on October 24, 2024 and sell it today you would earn a total of  3,500  from holding RBC Bearings Incorporated or generate 12.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

RBC Bearings Incorporated  vs.  DUK 34 01 APR 32

RBC Bearings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

DUK 34 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DUK 34 01 APR 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26442UAN4 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Bearings and 26442UAN4

The main advantage of trading using opposite RBC Bearings and 26442UAN4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, 26442UAN4 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 26442UAN4 will offset losses from the drop in 26442UAN4's long position.

The idea behind RBC Bearings Incorporated and DUK 34 01 APR 32 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.