Correlation Between RBC Bearings and Snap On

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Snap On 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 Snap On into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RBC Bearings and Snap On, you can compare the effects of market volatilities on RBC Bearings and Snap On 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 Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Snap On.

Diversification Opportunities for RBC Bearings and Snap On

0.1

Correlation Coefficient

RBC Bearings  Snap On

Average diversification

The 3 months correlation between RBC and Snap is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of RBC Bearings i.e., RBC Bearings and Snap On go up and down completely randomly.

Pair Corralation between RBC Bearings and Snap On

Given the investment horizon of 90 days RBC Bearings is expected to under-perform the Snap On. But the stock apears to be less risky and, when comparing its historical volatility, RBC Bearings is 1.23 times less risky than Snap On. The stock trades about -0.12 of its potential returns per unit of risk. The Snap On is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  27,789  in Snap On on September 2, 2024 and sell it today you would earn a total of  9,180  from holding Snap On or generate 33.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

RBC Bearings  vs.  Snap On

RBC Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Snap On

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and Snap On

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

The idea behind RBC Bearings and Snap On 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.