Correlation Between JD Sports and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both JD Sports 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 JD Sports and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Sports Fashion and RBC Bearings Incorporated, you can compare the effects of market volatilities on JD Sports 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 JD Sports with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and RBC Bearings.
Diversification Opportunities for JD Sports and RBC Bearings
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JDSPY and RBC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and RBC Bearings go up and down completely randomly.
Pair Corralation between JD Sports and RBC Bearings
Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the RBC Bearings. In addition to that, JD Sports is 2.47 times more volatile than RBC Bearings Incorporated. It trades about -0.01 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.08 per unit of volatility. If you would invest 21,314 in RBC Bearings Incorporated on August 31, 2024 and sell it today you would earn a total of 12,197 from holding RBC Bearings Incorporated or generate 57.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
JD Sports Fashion vs. RBC Bearings Incorporated
Performance |
| Timeline |
| JD Sports Fashion |
| RBC Bearings |
JD Sports and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD Sports and RBC Bearings
The main advantage of trading using opposite JD Sports and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports 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.| JD Sports vs. Burlington Stores | JD Sports vs. Childrens Place | JD Sports vs. Buckle Inc | JD Sports vs. Shoe Carnival |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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