Correlation Between Regal Beloit and IDEX

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

By analyzing existing cross correlation between Regal Beloit and IDEX Corporation, you can compare the effects of market volatilities on Regal Beloit and IDEX 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 Regal Beloit with a short position of IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regal Beloit and IDEX.

Diversification Opportunities for Regal Beloit and IDEX

0.74

Correlation Coefficient

Regal Beloit  IDEX

Poor diversification

The 3 months correlation between Regal and IDEX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Regal Beloit and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and Regal Beloit 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 Regal Beloit are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Regal Beloit i.e., Regal Beloit and IDEX go up and down completely randomly.

Pair Corralation between Regal Beloit and IDEX

Considering the 90-day investment horizon Regal Beloit is expected to generate 2.37 times less return on investment than IDEX. In addition to that, Regal Beloit is 1.64 times more volatile than IDEX Corporation. It trades about 0.05 of its total potential returns per unit of risk. IDEX Corporation is currently generating about 0.2 per unit of volatility. If you would invest  21,605  in IDEX Corporation on September 2, 2024 and sell it today you would earn a total of  1,458  from holding IDEX Corporation or generate 6.75% return on investment over 90 days.

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

Regal Beloit  vs.  IDEX Corp.

Regal Beloit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Beloit are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Regal Beloit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IDEX

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, IDEX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regal Beloit and IDEX

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

The idea behind Regal Beloit and IDEX Corporation 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.