Correlation Between RBC Bearings and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Lincoln Electric 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 RBC Bearings and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RBC Bearings Incorporated and Lincoln Electric Holdings, you can compare the effects of market volatilities on RBC Bearings and Lincoln Electric 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 RBC Bearings with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Lincoln Electric.
Diversification Opportunities for RBC Bearings and Lincoln Electric
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RBC and Lincoln is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and RBC Bearings 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 RBC Bearings Incorporated are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of RBC Bearings i.e., RBC Bearings and Lincoln Electric go up and down completely randomly.
Pair Corralation between RBC Bearings and Lincoln Electric
Assuming the 90 days horizon RBC Bearings Incorporated is expected to generate 1.17 times more return on investment than Lincoln Electric. However, RBC Bearings is 1.17 times more volatile than Lincoln Electric Holdings. It trades about 0.06 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.06 per unit of risk. If you would invest 20,600 in RBC Bearings Incorporated on September 2, 2024 and sell it today you would earn a total of 11,400 from holding RBC Bearings Incorporated or generate 55.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Lincoln Electric Holdings
Performance |
| Timeline |
| RBC Bearings |
| Lincoln Electric Holdings |
RBC Bearings and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Lincoln Electric
The main advantage of trading using opposite RBC Bearings and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Lincoln Electric 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 Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.The idea behind RBC Bearings Incorporated and Lincoln Electric Holdings 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.| Lincoln Electric vs. AB SKF | Lincoln Electric vs. RBC Bearings Incorporated | Lincoln Electric vs. Makita |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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