Correlation Between REDFLEX HOLDINGS and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both REDFLEX HOLDINGS and RBC Bearings 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 REDFLEX HOLDINGS and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REDFLEX HOLDINGS LTD and RBC Bearings Incorporated, you can compare the effects of market volatilities on REDFLEX HOLDINGS and RBC Bearings 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 REDFLEX HOLDINGS with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of REDFLEX HOLDINGS and RBC Bearings.
Diversification Opportunities for REDFLEX HOLDINGS and RBC Bearings
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between REDFLEX and RBC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding REDFLEX HOLDINGS LTD and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and REDFLEX HOLDINGS 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 REDFLEX HOLDINGS LTD are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of REDFLEX HOLDINGS i.e., REDFLEX HOLDINGS and RBC Bearings go up and down completely randomly.
Pair Corralation between REDFLEX HOLDINGS and RBC Bearings
Assuming the 90 days horizon REDFLEX HOLDINGS LTD is expected to generate 10.86 times more return on investment than RBC Bearings. However, REDFLEX HOLDINGS is 10.86 times more volatile than RBC Bearings Incorporated. It trades about 0.05 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.11 per unit of risk. If you would invest 14.00 in REDFLEX HOLDINGS LTD on September 1, 2024 and sell it today you would lose (11.21) from holding REDFLEX HOLDINGS LTD or give up 80.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
REDFLEX HOLDINGS LTD vs. RBC Bearings Incorporated
Performance |
| Timeline |
| REDFLEX HOLDINGS LTD |
| RBC Bearings |
REDFLEX HOLDINGS and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REDFLEX HOLDINGS and RBC Bearings
The main advantage of trading using opposite REDFLEX HOLDINGS and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REDFLEX HOLDINGS position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| REDFLEX HOLDINGS vs. ATT Inc | REDFLEX HOLDINGS vs. Merck Company | REDFLEX HOLDINGS vs. Walt Disney | REDFLEX HOLDINGS vs. Caterpillar |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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