Correlation Between LS Starrett and RBC Bearings

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

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

Diversification Opportunities for LS Starrett and RBC Bearings

-0.37

Correlation Coefficient

LS Starrett  RBC Bearings

Very good diversification

The 3 months correlation between SCX and RBC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding LS Starrett and RBC Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and LS Starrett 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 LS Starrett are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of LS Starrett i.e., LS Starrett and RBC Bearings go up and down completely randomly.

Pair Corralation between LS Starrett and RBC Bearings

If you would invest  1,250  in LS Starrett on August 31, 2024 and sell it today you would earn a total of  0.00  from holding LS Starrett or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.13%
Values	Daily Returns

LS Starrett  vs.  RBC Bearings

LS Starrett

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LS Starrett has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LS Starrett is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with LS Starrett and RBC Bearings

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

The idea behind LS Starrett and RBC Bearings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.