Correlation Between RBC Bearings and AMERICAN

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Can any of the company-specific risk be diversified away by investing in both RBC Bearings and AMERICAN 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 AMERICAN 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 AMERICAN EXPRESS PANY, you can compare the effects of market volatilities on RBC Bearings and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and AMERICAN.

Diversification Opportunities for RBC Bearings and AMERICAN

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between RBC and AMERICAN is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and AMERICAN EXPRESS PANY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS PANY 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS PANY has no effect on the direction of RBC Bearings i.e., RBC Bearings and AMERICAN go up and down completely randomly.

Pair Corralation between RBC Bearings and AMERICAN

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 3.05 times more return on investment than AMERICAN. However, RBC Bearings is 3.05 times more volatile than AMERICAN EXPRESS PANY. It trades about 0.2 of its potential returns per unit of risk. AMERICAN EXPRESS PANY is currently generating about -0.14 per unit of risk. If you would invest  31,537  in RBC Bearings Incorporated on September 13, 2024 and sell it today you would earn a total of  1,625  from holding RBC Bearings Incorporated or generate 5.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

RBC Bearings Incorporated  vs.  AMERICAN EXPRESS PANY

 Performance 
       Timeline  
RBC Bearings 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.
AMERICAN EXPRESS PANY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AMERICAN EXPRESS PANY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

RBC Bearings and AMERICAN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RBC Bearings and AMERICAN

The main advantage of trading using opposite RBC Bearings and AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, AMERICAN 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 AMERICAN will offset losses from the drop in AMERICAN's long position.
The idea behind RBC Bearings Incorporated and AMERICAN EXPRESS PANY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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