Correlation Between Dow Jones and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and RBC Bearings Incorporated, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and RBC Bearings.
Diversification Opportunities for Dow Jones and RBC Bearings
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and RBC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and RBC Bearings go up and down completely randomly.
Pair Corralation between Dow Jones and RBC Bearings
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the RBC Bearings. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.19 times less risky than RBC Bearings. The index trades about -0.19 of its potential returns per unit of risk. The RBC Bearings Incorporated is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 36,882 in RBC Bearings Incorporated on December 6, 2024 and sell it today you would lose (1,279) from holding RBC Bearings Incorporated or give up 3.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. RBC Bearings Incorporated
Performance |
| Timeline |
Dow Jones and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
RBC Bearings Incorporated
Pair trading matchups for RBC Bearings
Pair Trading with Dow Jones and RBC Bearings
The main advantage of trading using opposite Dow Jones and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aegean Airlines SA | Dow Jones vs. Drilling Tools International | Dow Jones vs. Cabo Drilling Corp | Dow Jones vs. Ryanair Holdings PLC |
| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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