Correlation Between RBC Bearings and African Agriculture
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and African Agriculture 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 African Agriculture 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 African Agriculture Holdings, you can compare the effects of market volatilities on RBC Bearings and African Agriculture 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 African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and African Agriculture.
Diversification Opportunities for RBC Bearings and African Agriculture
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RBC and African is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture 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 African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of RBC Bearings i.e., RBC Bearings and African Agriculture go up and down completely randomly.
Pair Corralation between RBC Bearings and African Agriculture
Considering the 90-day investment horizon RBC Bearings is expected to generate 12.81 times less return on investment than African Agriculture. But when comparing it to its historical volatility, RBC Bearings Incorporated is 14.99 times less risky than African Agriculture. It trades about 0.06 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6.27 in African Agriculture Holdings on September 4, 2024 and sell it today you would lose (5.90) from holding African Agriculture Holdings or give up 94.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.02% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. African Agriculture Holdings
Performance |
| Timeline |
| RBC Bearings |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
RBC Bearings and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and African Agriculture
The main advantage of trading using opposite RBC Bearings and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| African Agriculture vs. Comstock Holding Companies | African Agriculture vs. Hillman Solutions Corp | African Agriculture vs. Acme United | African Agriculture vs. CapitaLand Investment Limited |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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