Correlation Between RBC Bearings and Ross Stores
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on RBC Bearings and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Ross Stores.
Diversification Opportunities for RBC Bearings and Ross Stores
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between RBC and Ross is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of RBC Bearings i.e., RBC Bearings and Ross Stores go up and down completely randomly.
Pair Corralation between RBC Bearings and Ross Stores
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.31 times more return on investment than Ross Stores. However, RBC Bearings is 1.31 times more volatile than Ross Stores. It trades about 0.06 of its potential returns per unit of risk. Ross Stores is currently generating about 0.05 per unit of risk. If you would invest 22,370 in RBC Bearings Incorporated on September 3, 2024 and sell it today you would earn a total of 11,141 from holding RBC Bearings Incorporated or generate 49.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RBC Bearings Incorporated vs. Ross Stores
Performance |
| Timeline |
| RBC Bearings |
| Ross Stores |
RBC Bearings and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Ross Stores
The main advantage of trading using opposite RBC Bearings and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On | RBC Bearings vs. Timken Company |
| Ross Stores vs. Burlington Stores | Ross Stores vs. American Eagle Outfitters | Ross Stores vs. Lululemon Athletica | Ross Stores vs. Foot Locker |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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