Correlation Between Lincoln Electric and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric 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 Lincoln Electric and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln Electric Holdings and RBC Bearings Incorporated, you can compare the effects of market volatilities on Lincoln Electric 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 Lincoln Electric with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and RBC Bearings.
Diversification Opportunities for Lincoln Electric and RBC Bearings
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lincoln and RBC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Lincoln Electric 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 Lincoln Electric Holdings 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 Lincoln Electric i.e., Lincoln Electric and RBC Bearings go up and down completely randomly.
Pair Corralation between Lincoln Electric and RBC Bearings
Assuming the 90 days horizon Lincoln Electric is expected to generate 1.72 times less return on investment than RBC Bearings. In addition to that, Lincoln Electric is 1.03 times more volatile than RBC Bearings Incorporated. It trades about 0.22 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.39 per unit of volatility. If you would invest 26,200 in RBC Bearings Incorporated on August 31, 2024 and sell it today you would earn a total of 5,800 from holding RBC Bearings Incorporated or generate 22.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. RBC Bearings Incorporated
Performance |
| Timeline |
| Lincoln Electric Holdings |
| RBC Bearings |
Lincoln Electric and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and RBC Bearings
The main advantage of trading using opposite Lincoln Electric and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric 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.| Lincoln Electric vs. USWE SPORTS AB | Lincoln Electric vs. BII Railway Transportation | Lincoln Electric vs. Cars Inc | Lincoln Electric vs. GRUPO CARSO A1 |
| RBC Bearings vs. CosmoSteel Holdings Limited | RBC Bearings vs. MITSUBISHI STEEL MFG | RBC Bearings vs. Tower One Wireless | RBC Bearings vs. Khiron Life Sciences |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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