Correlation Between SVELEV and RBC Bearings

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

By analyzing existing cross correlation between SVELEV 13 10 FEB 28 and RBC Bearings Incorporated, you can compare the effects of market volatilities on SVELEV 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 SVELEV with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SVELEV and RBC Bearings.

Diversification Opportunities for SVELEV and RBC Bearings

-0.77

Correlation Coefficient

SVELEV  RBC Bearings

Pay attention - limited upside

The 3 months correlation between SVELEV and RBC is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SVELEV 13 10 FEB 28 and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and SVELEV 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 SVELEV 13 10 FEB 28 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 SVELEV i.e., SVELEV and RBC Bearings go up and down completely randomly.

Pair Corralation between SVELEV and RBC Bearings

Assuming the 90 days trading horizon SVELEV is expected to generate 4.81 times less return on investment than RBC Bearings. But when comparing it to its historical volatility, SVELEV 13 10 FEB 28 is 4.69 times less risky than RBC Bearings. It trades about 0.09 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,746  in RBC Bearings Incorporated on September 12, 2024 and sell it today you would earn a total of  11,874  from holding RBC Bearings Incorporated or generate 54.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	63.44%
Values	Daily Returns

SVELEV 13 10 FEB 28  vs.  RBC Bearings Incorporated

SVELEV 13 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SVELEV 13 10 FEB 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SVELEV 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SVELEV and RBC Bearings

The main advantage of trading using opposite SVELEV and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SVELEV 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 SVELEV 13 10 FEB 28 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.