Correlation Between RBC Bearings and LATAM Airlines
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and LATAM Airlines 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 LATAM Airlines 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 LATAM Airlines Group, you can compare the effects of market volatilities on RBC Bearings and LATAM Airlines 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 LATAM Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and LATAM Airlines.
Diversification Opportunities for RBC Bearings and LATAM Airlines
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RBC and LATAM is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines 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 LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of RBC Bearings i.e., RBC Bearings and LATAM Airlines go up and down completely randomly.
Pair Corralation between RBC Bearings and LATAM Airlines
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.43 times more return on investment than LATAM Airlines. However, RBC Bearings is 1.43 times more volatile than LATAM Airlines Group. It trades about 0.34 of its potential returns per unit of risk. LATAM Airlines Group is currently generating about 0.33 per unit of risk. If you would invest 29,781 in RBC Bearings Incorporated on November 3, 2024 and sell it today you would earn a total of 5,094 from holding RBC Bearings Incorporated or generate 17.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. LATAM Airlines Group
Performance |
| Timeline |
| RBC Bearings |
| LATAM Airlines Group |
RBC Bearings and LATAM Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and LATAM Airlines
The main advantage of trading using opposite RBC Bearings and LATAM Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, LATAM Airlines 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 LATAM Airlines will offset losses from the drop in LATAM Airlines' long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| LATAM Airlines vs. Mattel Inc | LATAM Airlines vs. Asure Software | LATAM Airlines vs. Datadog | LATAM Airlines vs. Planet Fitness |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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