Correlation Between RBC Bearings and Universal Technical

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

Diversification Opportunities for RBC Bearings and Universal Technical

0.81

Correlation Coefficient

RBC Bearings  Universal Technical

Very poor diversification

The 3 months correlation between RBC and Universal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of RBC Bearings i.e., RBC Bearings and Universal Technical go up and down completely randomly.

Pair Corralation between RBC Bearings and Universal Technical

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.65 times more return on investment than Universal Technical. However, RBC Bearings Incorporated is 1.55 times less risky than Universal Technical. It trades about 0.11 of its potential returns per unit of risk. Universal Technical Institute is currently generating about 0.03 per unit of risk. If you would invest  29,709  in RBC Bearings Incorporated on December 28, 2024 and sell it today you would earn a total of  3,567  from holding RBC Bearings Incorporated or generate 12.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

RBC Bearings Incorporated  vs.  Universal Technical Institute

RBC Bearings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Universal Technical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Universal Technical is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RBC Bearings and Universal Technical

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

The idea behind RBC Bearings Incorporated and Universal Technical Institute 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.