Correlation Between RBC Bearings and Alta Equipment
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Alta Equipment 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 Alta Equipment 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 Alta Equipment Group, you can compare the effects of market volatilities on RBC Bearings and Alta Equipment 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 Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Alta Equipment.
Diversification Opportunities for RBC Bearings and Alta Equipment
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RBC and Alta is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of RBC Bearings i.e., RBC Bearings and Alta Equipment go up and down completely randomly.
Pair Corralation between RBC Bearings and Alta Equipment
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.43 times more return on investment than Alta Equipment. However, RBC Bearings Incorporated is 2.32 times less risky than Alta Equipment. It trades about 0.08 of its potential returns per unit of risk. Alta Equipment Group is currently generating about -0.02 per unit of risk. 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Alta Equipment Group
Performance |
| Timeline |
| RBC Bearings |
| Alta Equipment Group |
RBC Bearings and Alta Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Alta Equipment
The main advantage of trading using opposite RBC Bearings and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Alta Equipment 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 Alta Equipment will offset losses from the drop in Alta Equipment's long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| Alta Equipment vs. PROG Holdings | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Custom Truck One |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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