Correlation Between RBC Bearings and Makita
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Makita 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 Makita 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 Makita, you can compare the effects of market volatilities on RBC Bearings and Makita 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 Makita. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Makita.
Diversification Opportunities for RBC Bearings and Makita
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RBC and Makita is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of RBC Bearings i.e., RBC Bearings and Makita go up and down completely randomly.
Pair Corralation between RBC Bearings and Makita
Assuming the 90 days horizon RBC Bearings Incorporated is expected to generate 0.8 times more return on investment than Makita. However, RBC Bearings Incorporated is 1.26 times less risky than Makita. It trades about 0.36 of its potential returns per unit of risk. Makita is currently generating about 0.12 per unit of risk. If you would invest 26,800 in RBC Bearings Incorporated on August 28, 2024 and sell it today you would earn a total of 5,200 from holding RBC Bearings Incorporated or generate 19.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Makita
Performance |
| Timeline |
| RBC Bearings |
| Makita |
RBC Bearings and Makita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Makita
The main advantage of trading using opposite RBC Bearings and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Makita 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 Makita will offset losses from the drop in Makita's long position.| RBC Bearings vs. Stanley Black Decker | RBC Bearings vs. AB SKF | RBC Bearings vs. MISUMI GROUP INC | RBC Bearings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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