Correlation Between RBC Bearings and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on RBC Bearings and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Kaiser Aluminum.
Diversification Opportunities for RBC Bearings and Kaiser Aluminum
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and Kaiser is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of RBC Bearings i.e., RBC Bearings and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between RBC Bearings and Kaiser Aluminum
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.01 times more return on investment than Kaiser Aluminum. However, RBC Bearings is 1.01 times more volatile than Kaiser Aluminum. It trades about 0.28 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.09 per unit of risk. If you would invest 29,781 in RBC Bearings Incorporated on November 2, 2024 and sell it today you would earn a total of 2,421 from holding RBC Bearings Incorporated or generate 8.13% 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. Kaiser Aluminum
Performance |
| Timeline |
| RBC Bearings |
| Kaiser Aluminum |
RBC Bearings and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Kaiser Aluminum
The main advantage of trading using opposite RBC Bearings and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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