Correlation Between RBC Bearings and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Palomar Holdings 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 Palomar Holdings 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 Palomar Holdings, you can compare the effects of market volatilities on RBC Bearings and Palomar Holdings 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 Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Palomar Holdings.
Diversification Opportunities for RBC Bearings and Palomar Holdings
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RBC and Palomar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings 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 Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of RBC Bearings i.e., RBC Bearings and Palomar Holdings go up and down completely randomly.
Pair Corralation between RBC Bearings and Palomar Holdings
Considering the 90-day investment horizon RBC Bearings is expected to generate 1.25 times less return on investment than Palomar Holdings. In addition to that, RBC Bearings is 1.14 times more volatile than Palomar Holdings. It trades about 0.34 of its total potential returns per unit of risk. Palomar Holdings is currently generating about 0.48 per unit of volatility. If you would invest 8,838 in Palomar Holdings on September 2, 2024 and sell it today you would earn a total of 1,992 from holding Palomar Holdings or generate 22.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Palomar Holdings
Performance |
| Timeline |
| RBC Bearings |
| Palomar Holdings |
RBC Bearings and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Palomar Holdings
The main advantage of trading using opposite RBC Bearings and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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