Correlation Between Universal Music and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Universal Music 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 Universal Music and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Music Group and RBC Bearings Incorporated, you can compare the effects of market volatilities on Universal Music 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 Universal Music with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Music and RBC Bearings.
Diversification Opportunities for Universal Music and RBC Bearings
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and RBC is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Universal Music Group and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Universal Music 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 Universal Music Group 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 Universal Music i.e., Universal Music and RBC Bearings go up and down completely randomly.
Pair Corralation between Universal Music and RBC Bearings
Assuming the 90 days horizon Universal Music Group is expected to under-perform the RBC Bearings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Universal Music Group is 1.19 times less risky than RBC Bearings. The pink sheet trades about -0.11 of its potential returns per unit of risk. The RBC Bearings Incorporated is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 28,637 in RBC Bearings Incorporated on August 31, 2024 and sell it today you would earn a total of 5,329 from holding RBC Bearings Incorporated or generate 18.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Music Group vs. RBC Bearings Incorporated
Performance |
| Timeline |
| Universal Music Group |
| RBC Bearings |
Universal Music and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Music and RBC Bearings
The main advantage of trading using opposite Universal Music and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Music 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.| Universal Music vs. ZoomerMedia Limited | Universal Music vs. Network Media Group | Universal Music vs. New Wave Holdings |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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