Correlation Between RBC Bearings and NL Industries
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on RBC Bearings and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and NL Industries.
Diversification Opportunities for RBC Bearings and NL Industries
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RBC and NL Industries is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of RBC Bearings i.e., RBC Bearings and NL Industries go up and down completely randomly.
Pair Corralation between RBC Bearings and NL Industries
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.88 times more return on investment than NL Industries. However, RBC Bearings Incorporated is 1.14 times less risky than NL Industries. It trades about 0.28 of its potential returns per unit of risk. NL Industries is currently generating about -0.17 per unit of risk. If you would invest 31,326 in RBC Bearings Incorporated on November 27, 2024 and sell it today you would earn a total of 4,430 from holding RBC Bearings Incorporated or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. NL Industries
Performance |
| Timeline |
| RBC Bearings |
| NL Industries |
RBC Bearings and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and NL Industries
The main advantage of trading using opposite RBC Bearings and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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