Correlation Between 50249AAH6 and RBC Bearings

Can any of the company-specific risk be diversified away by investing in both 50249AAH6 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 50249AAH6 and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LYB INTERNATIONAL FINANCE and RBC Bearings Incorporated, you can compare the effects of market volatilities on 50249AAH6 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 50249AAH6 with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of 50249AAH6 and RBC Bearings.

Diversification Opportunities for 50249AAH6 and RBC Bearings

0.02

Correlation Coefficient

50249AAH6  RBC Bearings

Significant diversification

The 3 months correlation between 50249AAH6 and RBC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding LYB INTERNATIONAL FINANCE and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and 50249AAH6 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 LYB INTERNATIONAL FINANCE 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 50249AAH6 i.e., 50249AAH6 and RBC Bearings go up and down completely randomly.

Pair Corralation between 50249AAH6 and RBC Bearings

Assuming the 90 days trading horizon LYB INTERNATIONAL FINANCE is expected to generate 1.31 times more return on investment than RBC Bearings. However, 50249AAH6 is 1.31 times more volatile than RBC Bearings Incorporated. It trades about 0.11 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.14 per unit of risk. If you would invest  7,376  in LYB INTERNATIONAL FINANCE on October 23, 2024 and sell it today you would earn a total of  149.00  from holding LYB INTERNATIONAL FINANCE or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

LYB INTERNATIONAL FINANCE  vs.  RBC Bearings Incorporated

LYB INTERNATIONAL FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB INTERNATIONAL FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 50249AAH6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

RBC Bearings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with 50249AAH6 and RBC Bearings

The main advantage of trading using opposite 50249AAH6 and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 50249AAH6 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 LYB INTERNATIONAL FINANCE and RBC Bearings Incorporated 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.