Correlation Between RBC Bearings and Xunlei

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

Diversification Opportunities for RBC Bearings and Xunlei

0.21

Correlation Coefficient

RBC Bearings  Xunlei

Modest diversification

The 3 months correlation between RBC and Xunlei is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of RBC Bearings i.e., RBC Bearings and Xunlei go up and down completely randomly.

Pair Corralation between RBC Bearings and Xunlei

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.51 times more return on investment than Xunlei. However, RBC Bearings Incorporated is 1.95 times less risky than Xunlei. It trades about 0.16 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.07 per unit of risk. If you would invest  29,061  in RBC Bearings Incorporated on September 16, 2024 and sell it today you would earn a total of  3,697  from holding RBC Bearings Incorporated or generate 12.72% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Xunlei Ltd Adr

RBC Bearings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 10 (%) 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.

Xunlei Ltd Adr

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and Xunlei

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

The idea behind RBC Bearings Incorporated and Xunlei Ltd Adr 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.