Correlation Between RBC Bearings and FEDEX

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Can any of the company-specific risk be diversified away by investing in both RBC Bearings and FEDEX 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 FEDEX 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 FEDEX P 42, you can compare the effects of market volatilities on RBC Bearings and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and FEDEX.

Diversification Opportunities for RBC Bearings and FEDEX

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between RBC and FEDEX is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and FEDEX P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 42 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 42 has no effect on the direction of RBC Bearings i.e., RBC Bearings and FEDEX go up and down completely randomly.

Pair Corralation between RBC Bearings and FEDEX

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the FEDEX. In addition to that, RBC Bearings is 1.68 times more volatile than FEDEX P 42. It trades about -0.55 of its total potential returns per unit of risk. FEDEX P 42 is currently generating about 0.02 per unit of volatility. If you would invest  9,881  in FEDEX P 42 on October 6, 2024 and sell it today you would earn a total of  18.00  from holding FEDEX P 42 or generate 0.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.0%
ValuesDaily Returns

RBC Bearings Incorporated  vs.  FEDEX P 42

 Performance 
       Timeline  
RBC Bearings 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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.
FEDEX P 42 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FEDEX P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RBC Bearings and FEDEX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RBC Bearings and FEDEX

The main advantage of trading using opposite RBC Bearings and FEDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, FEDEX 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 FEDEX will offset losses from the drop in FEDEX's long position.
The idea behind RBC Bearings Incorporated and FEDEX P 42 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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