Correlation Between RBC Bearings and 665859AT1

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and 665859AT1 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 665859AT1 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 NORTHERN TR P, you can compare the effects of market volatilities on RBC Bearings and 665859AT1 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 665859AT1. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and 665859AT1.

Diversification Opportunities for RBC Bearings and 665859AT1

-0.27

Correlation Coefficient

RBC Bearings  665859AT1

Very good diversification

The 3 months correlation between RBC and 665859AT1 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and NORTHERN TR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN TR 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 665859AT1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN TR P has no effect on the direction of RBC Bearings i.e., RBC Bearings and 665859AT1 go up and down completely randomly.

Pair Corralation between RBC Bearings and 665859AT1

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to under-perform the 665859AT1. In addition to that, RBC Bearings is 3.38 times more volatile than NORTHERN TR P. It trades about -0.6 of its total potential returns per unit of risk. NORTHERN TR P is currently generating about -0.26 per unit of volatility. If you would invest  9,733  in NORTHERN TR P on October 3, 2024 and sell it today you would lose (157.00) from holding NORTHERN TR P or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

RBC Bearings Incorporated  vs.  NORTHERN TR P

RBC Bearings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) 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.

NORTHERN TR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHERN TR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 665859AT1 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 665859AT1

The main advantage of trading using opposite RBC Bearings and 665859AT1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, 665859AT1 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 665859AT1 will offset losses from the drop in 665859AT1's long position.

The idea behind RBC Bearings Incorporated and NORTHERN TR 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.