Correlation Between RBC Bearings and Freedom Holding
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Freedom Holding 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 Freedom Holding 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 Freedom Holding Corp, you can compare the effects of market volatilities on RBC Bearings and Freedom Holding 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 Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Freedom Holding.
Diversification Opportunities for RBC Bearings and Freedom Holding
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and Freedom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of RBC Bearings i.e., RBC Bearings and Freedom Holding go up and down completely randomly.
Pair Corralation between RBC Bearings and Freedom Holding
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.23 times more return on investment than Freedom Holding. However, RBC Bearings is 1.23 times more volatile than Freedom Holding Corp. It trades about 0.33 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.15 per unit of risk. If you would invest 28,857 in RBC Bearings Incorporated on August 28, 2024 and sell it today you would earn a total of 5,021 from holding RBC Bearings Incorporated or generate 17.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Freedom Holding Corp
Performance |
| Timeline |
| RBC Bearings |
| Freedom Holding Corp |
RBC Bearings and Freedom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Freedom Holding
The main advantage of trading using opposite RBC Bearings and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Freedom Holding 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 Freedom Holding will offset losses from the drop in Freedom Holding's long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| Freedom Holding vs. Visa Class A | Freedom Holding vs. Diamond Hill Investment | Freedom Holding vs. Distoken Acquisition | Freedom Holding vs. AllianceBernstein Holding LP |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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