Correlation Between RBC Bearings and NI Holdings

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

Diversification Opportunities for RBC Bearings and NI Holdings

-0.56

Correlation Coefficient

RBC Bearings  NI Holdings

Excellent diversification

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

Pair Corralation between RBC Bearings and NI Holdings

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.02 times more return on investment than NI Holdings. However, RBC Bearings is 1.02 times more volatile than NI Holdings. It trades about 0.05 of its potential returns per unit of risk. NI Holdings is currently generating about 0.01 per unit of risk. If you would invest  16,692  in RBC Bearings Incorporated on January 26, 2024 and sell it today you would earn a total of  7,797  from holding RBC Bearings Incorporated or generate 46.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

RBC Bearings Incorporated  vs.  NI Holdings

RBC Bearings rporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Bearings Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NI Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, NI Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and NI Holdings

The main advantage of trading using opposite RBC Bearings and NI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, NI Holdings 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 NI Holdings will offset losses from the drop in NI Holdings' long position.

The idea behind RBC Bearings Incorporated and NI Holdings 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.

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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.