Correlation Between RBC Bearings and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee, you can compare the effects of market volatilities on RBC Bearings and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Westrock Coffee.
Diversification Opportunities for RBC Bearings and Westrock Coffee
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RBC and Westrock is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of RBC Bearings i.e., RBC Bearings and Westrock Coffee go up and down completely randomly.
Pair Corralation between RBC Bearings and Westrock Coffee
Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.69 times more return on investment than Westrock Coffee. However, RBC Bearings Incorporated is 1.44 times less risky than Westrock Coffee. It trades about 0.05 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.05 per unit of risk. If you would invest 20,906 in RBC Bearings Incorporated on September 24, 2024 and sell it today you would earn a total of 9,722 from holding RBC Bearings Incorporated or generate 46.5% 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. Westrock Coffee
Performance |
| Timeline |
| RBC Bearings |
| Westrock Coffee |
RBC Bearings and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RBC Bearings and Westrock Coffee
The main advantage of trading using opposite RBC Bearings and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Toro Co | RBC Bearings vs. Timken Company | RBC Bearings vs. Eastern Co |
| Westrock Coffee vs. J J Snack | Westrock Coffee vs. Central Garden Pet | Westrock Coffee vs. Lancaster Colony | Westrock Coffee vs. The A2 Milk |
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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