Correlation Between RBC Bearings and FREEPORT

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and FREEPORT 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 FREEPORT 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 FREEPORT MCMORAN INC 4375, you can compare the effects of market volatilities on RBC Bearings and FREEPORT 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 FREEPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and FREEPORT.

Diversification Opportunities for RBC Bearings and FREEPORT

0.27

Correlation Coefficient

RBC Bearings  FREEPORT

Modest diversification

The 3 months correlation between RBC and FREEPORT is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and FREEPORT MCMORAN INC 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREEPORT MCMORAN INC 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 FREEPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREEPORT MCMORAN INC has no effect on the direction of RBC Bearings i.e., RBC Bearings and FREEPORT go up and down completely randomly.

Pair Corralation between RBC Bearings and FREEPORT

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 2.33 times more return on investment than FREEPORT. However, RBC Bearings is 2.33 times more volatile than FREEPORT MCMORAN INC 4375. It trades about 0.06 of its potential returns per unit of risk. FREEPORT MCMORAN INC 4375 is currently generating about -0.13 per unit of risk. If you would invest  28,676  in RBC Bearings Incorporated on October 6, 2024 and sell it today you would earn a total of  1,489  from holding RBC Bearings Incorporated or generate 5.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

RBC Bearings Incorporated  vs.  FREEPORT MCMORAN INC 4375

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.

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Bearings and FREEPORT

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

The idea behind RBC Bearings Incorporated and FREEPORT MCMORAN INC 4375 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.