Correlation Between RBC Bearings and First Watch
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and First Watch 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 First Watch 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 First Watch Restaurant, you can compare the effects of market volatilities on RBC Bearings and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and First Watch.
Diversification Opportunities for RBC Bearings and First Watch
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of RBC Bearings i.e., RBC Bearings and First Watch go up and down completely randomly.
Pair Corralation between RBC Bearings and First Watch
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.62 times more return on investment than First Watch. However, RBC Bearings Incorporated is 1.61 times less risky than First Watch. It trades about 0.08 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.02 per unit of risk. If you would invest 22,037 in RBC Bearings Incorporated on September 12, 2024 and sell it today you would earn a total of 11,217 from holding RBC Bearings Incorporated or generate 50.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. First Watch Restaurant
Performance |
| Timeline |
| RBC Bearings |
| First Watch Restaurant |
RBC Bearings and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and First Watch
The main advantage of trading using opposite RBC Bearings and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch's long position.| RBC Bearings vs. Kennametal | RBC Bearings vs. Snap On | RBC Bearings vs. Eastern Co | RBC Bearings vs. Lincoln Electric Holdings |
| First Watch vs. Noble Romans | First Watch vs. Good Times Restaurants | First Watch vs. Flanigans Enterprises | First Watch vs. FAT Brands |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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