Correlation Between Vulcan Materials and RBC Bearings

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

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

Diversification Opportunities for Vulcan Materials and RBC Bearings

-0.1

Correlation Coefficient

Vulcan Materials  RBC Bearings

Good diversification

The 3 months correlation between Vulcan and RBC is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and RBC Bearings go up and down completely randomly.

Pair Corralation between Vulcan Materials and RBC Bearings

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the RBC Bearings. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.11 times less risky than RBC Bearings. The stock trades about -0.16 of its potential returns per unit of risk. The RBC Bearings Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  32,049  in RBC Bearings Incorporated on December 17, 2024 and sell it today you would earn a total of  1,599  from holding RBC Bearings Incorporated or generate 4.99% return on investment over 90 days.

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

Vulcan Materials  vs.  RBC Bearings Incorporated

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RBC Bearings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vulcan Materials and RBC Bearings

The main advantage of trading using opposite Vulcan Materials and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.