Correlation Between RBC Bearings and United Homes
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and United Homes 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 United Homes 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 United Homes Group, you can compare the effects of market volatilities on RBC Bearings and United Homes 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 United Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and United Homes.
Diversification Opportunities for RBC Bearings and United Homes
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and United is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and United Homes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Homes 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 United Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Homes Group has no effect on the direction of RBC Bearings i.e., RBC Bearings and United Homes go up and down completely randomly.
Pair Corralation between RBC Bearings and United Homes
Considering the 90-day investment horizon RBC Bearings is expected to generate 1.46 times less return on investment than United Homes. But when comparing it to its historical volatility, RBC Bearings Incorporated is 2.63 times less risky than United Homes. It trades about 0.08 of its potential returns per unit of risk. United Homes Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 568.00 in United Homes Group on September 1, 2024 and sell it today you would earn a total of 70.00 from holding United Homes Group or generate 12.32% 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. United Homes Group
Performance |
| Timeline |
| RBC Bearings |
| United Homes Group |
RBC Bearings and United Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and United Homes
The main advantage of trading using opposite RBC Bearings and United Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, United Homes 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 United Homes will offset losses from the drop in United Homes' long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
| United Homes vs. AmTrust Financial Services | United Homes vs. Artisan Partners Asset | United Homes vs. Marine Products | United Homes vs. Juniata Valley Financial |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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