Correlation Between Alta Equipment and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Alta Equipment 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 Alta Equipment and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alta Equipment Group and RBC Bearings Incorporated, you can compare the effects of market volatilities on Alta Equipment 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 Alta Equipment with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and RBC Bearings.
Diversification Opportunities for Alta Equipment and RBC Bearings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alta and RBC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and RBC Bearings go up and down completely randomly.
Pair Corralation between Alta Equipment and RBC Bearings
Given the investment horizon of 90 days Alta Equipment Group is expected to generate 2.08 times more return on investment than RBC Bearings. However, Alta Equipment is 2.08 times more volatile than RBC Bearings Incorporated. It trades about 0.2 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.33 per unit of risk. If you would invest 665.00 in Alta Equipment Group on August 28, 2024 and sell it today you would earn a total of 147.00 from holding Alta Equipment Group or generate 22.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alta Equipment Group vs. RBC Bearings Incorporated
Performance |
| Timeline |
| Alta Equipment Group |
| RBC Bearings |
Alta Equipment and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and RBC Bearings
The main advantage of trading using opposite Alta Equipment and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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.| Alta Equipment vs. PROG Holdings | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Mega Matrix Corp | Alta Equipment vs. FTAI Aviation Ltd |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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