Correlation Between HNI Corp and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both HNI Corp 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 HNI Corp and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HNI Corp and RBC Bearings Incorporated, you can compare the effects of market volatilities on HNI Corp 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 HNI Corp with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI Corp and RBC Bearings.
Diversification Opportunities for HNI Corp and RBC Bearings
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HNI and RBC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and RBC Bearings go up and down completely randomly.
Pair Corralation between HNI Corp and RBC Bearings
Considering the 90-day investment horizon HNI Corp is expected to generate 1.79 times less return on investment than RBC Bearings. But when comparing it to its historical volatility, HNI Corp is 1.31 times less risky than RBC Bearings. It trades about 0.23 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 28,857 in RBC Bearings Incorporated on August 27, 2024 and sell it today you would earn a total of 4,825 from holding RBC Bearings Incorporated or generate 16.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HNI Corp vs. RBC Bearings Incorporated
Performance |
| Timeline |
| HNI Corp |
| RBC Bearings |
HNI Corp and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HNI Corp and RBC Bearings
The main advantage of trading using opposite HNI Corp and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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 HNI Corp 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.| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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