Correlation Between RBC Bearings and NISOURCE

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

Diversification Opportunities for RBC Bearings and NISOURCE

-0.03

Correlation Coefficient

RBC Bearings  NISOURCE

Good diversification

The 3 months correlation between RBC and NISOURCE is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of RBC Bearings i.e., RBC Bearings and NISOURCE go up and down completely randomly.

Pair Corralation between RBC Bearings and NISOURCE

Considering the 90-day investment horizon RBC Bearings is expected to generate 192.49 times less return on investment than NISOURCE. But when comparing it to its historical volatility, RBC Bearings Incorporated is 68.65 times less risky than NISOURCE. It trades about 0.04 of its potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,456  in NISOURCE FIN P on October 23, 2024 and sell it today you would lose (695.00) from holding NISOURCE FIN P or give up 8.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.63%
Values	Daily Returns

RBC Bearings Incorporated  vs.  NISOURCE FIN P

RBC Bearings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NISOURCE FIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISOURCE FIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NISOURCE 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 NISOURCE

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

The idea behind RBC Bearings Incorporated and NISOURCE FIN P 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.